HDFC Bank on Monday approved the acquisition of Centurion Bank of Punjab (CBoP) for Rs 9,510 crore in the largest merger in the financial sector in India. However, the merged entity would still be two-fifth the size of the country’s second largest lender, ICICI Bank.
CBoP shareholders will get one share of HDFC Bank for every 29 shares held by them.
The two banks did not comment on the price at which the shares were valued for the purpose of the swap ratio. The valuation arrived at is based on HDFC Bank’s closing share price of 1,474.95 last Friday and the total outstanding shares of CBoP.
HDFC Bank shares fell 3.54 per cent on the Bombay Stock Exchange on Monday to close at Rs 1,422.70 a share as investors felt the acquisition was a little costlier, while CBoP shares were down 14.45 per cent to Rs 48.25 a share as the price got aligned with the share-swap ratio.
The swap ratio was based on the recommendations made by joint valuers Dalal & Shah, a chartered accounting firm, and Ernst & Young, a consulting firm.
The merger will affect the performance parameters of the merged entity, which is compared to HDFC Bank now, as the productivity at CBoP was comparatively lower.
The boards of the two banks will meet again on February 28 to consider the draft scheme of amalgamation, which will be subject to regulatory approvals.
The HDFC Bank board will also consider making a preferential offer to its promoter, Housing Development Finance Corporation (HDFC), to enable it to maintain its shareholding in the merged entity.
HDFC held 23.28 per cent in HDFC Bank at the end of December 31, 2007. HDFC will need about Rs 3,900 crore to raise its shareholding after it falls to around 19 per cent after the merger.
CBoP’s Non-Executive Chairman Rana Talwar will be appointed the non-executive director of the merged entity, while its Managing Director and CEO Shailendra Bhandari will join the board as executive director.
Rana Talwar's Sabre Capital would hold less than 1 per cent stake in the merged entity from 3.48 in CBoP, while Bank Muscat's holding will decline to less than 4 per cent from over 14 per cent in CBoP.
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Tuesday, February 26, 2008
HDFC Bank, CBoP seal largest banking merger
Sunday, February 24, 2008
HDFC Bank, CBoP merger ratio at 1:29
HDFC Bank today announced the merger ratio of Centurion Bank of Punjab (CBoP) with itself at 1:29.
According to a release issued by HDFC Bank to the BSE today, based on the joint valuation report submitted by Ernst & Young and Dalal & Shah, the board today approved the share swap ratio of 1 equity share of Rs 10 each of HDFC Bank for every 29 equity shares of Re 1 each held in Centurion Bank of Punjab. This share swap ratio is subject to due diligence to be conducted in this regard.
The bank's board observed that in the event of the merger of Centurion Bank of Punjab with HDFC Bank being approved at its meeting on February 28, 2008, it would consider making a preferential offer to its promoter Housing Development Finance Corporation (HDFC) to enable HDFC to maintain its shareholding percentage in the Bank, the release added.
Friday, February 22, 2008
HDFC Bank to buy CBoP in all-stock deal
HDFC Bank, India’s third largest bank, is all set to buy Centurion Bank of Punjab in an all-stock deal.
The boards of both the banks will meet on Saturday to finalise the contours of the deal, which will be the biggest banking merger in India.
The banks’ top brass have been involved in marathon meetings in the past two days to work out the details of the proposed merger.
The swap ratio will be decided later. Initial calculations suggest that a Centurion shareholder will get one share of HDFC Bank for every 20 shares, according to sources familiar with the development.
However, the exact ratio will be arrived at after a consensus, said an HDFC executive. Post the deal, HDFC Bank will get around 400 branches and thus surpass ICICI Bank in terms of branch presence.
More importantly, the bank’s presence in the north and south will receive a boost. Centurion has nearly 170 branches in the north and around 140 branches in the south, whereas HDFC Bank has 250 branches in the north and 150 in southern India.
“We will also acquire a strong small and medium enterprises portfolio from Centurion,” the executive added. HDFC Bank has almost 10 million customers compared with Centurion’s 2.5 million.
The proposed merger has been spearheaded by Housing and Development Finance Corporation chairman Deepak Parekh, Centurion Bank of Punjab chairman Rana Talwar and Ambit CEO Ashok Wadhwa, said a senior HDFC Bank executive.
The shares of Centurion, which rose sharply yesterday due to the merger buzz, declined today by 1.14 per cent to end at Rs 56.40 on the Bombay Stock Exchange. The HDFC Bank scrip closed lower by 4.40 per cent to Rs 1474.95.
