Kist, Vibor call off merger

KATHMANDU, NOV 02 -

Seven months after they signed a memorandum of understanding (MoU) for merger, Kist Bank and Vibor Bikas Bank on Friday decided to call off their amalgamation process.

A meeting of the merger committee on Friday decided to table the decision not to move ahead with merger process at the banks ’ boards. “The proposal of ending the merger process will now be tabled at the board meeting of both the banks to formally close the chapter,” a member of the committee said.

Three representatives from Kist and two from Vibor were in the merger committee. Kist and Vibor had signed the merger MoU on Mar 21, 2013. Sources from both the sides said differences over how to move ahead in the post merger situation led to the decision to end the merger process.

The differences surfaced after the exit of Kamal Gyawali, former managing director of Kist Bank, in June over the embezzlement of the bank’s money. Earlier, there had been an agreement that Gyawali would remain as the chief executive of the merged entity. “The merger process was moving ahead smoothly with an aim to conclude it within mid-July last fiscal year before Gyawali’s exit from the bank,” said a merger committee member. “After his exit, there was no clear direction about how to move ahead.”

The banks have not yet completed the due diligence audit (DDA) which would fix the value of the shares and would help maintain the swap ratio during the merger.

Amid delay, shareholders were mounting pressure on both the sides to conclude the process as soon as possible given their shares were on hold for share trading at the secondary market since the MoU was signed.

As per the earlier understanding, the two banks also could not reduce their non-performing loans (NPL) to below 5 percent before the merger. Two sides had agreed to reduce the NPL below 5 percent within three months, but it did not materialise. “There is still not environment to reduce the NPL to less than 5 percent immediately,” said another committee member. “In this context, shareholders will not get benefit even from the merger.”

He said as the fulfilment of the conditions set in the MoU was elusive, the banks agreed that moving ahead with the merger was difficult.

Jyoti Group, which has been in the financial sector for last one and half decades through Bhajuratna Finance, first completed Bhajuratna’s merger with Vibor one and half years ago.

Source: The Kathmandu Post