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Centurion Bank of Punjab and HDFC Bank Directors Approve Merger Talks

Centurion Bank of Punjab and HDFC Bank Directors Approve Merger Talks



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Published by: umangds on Sep 01, 2009
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Centurion Bank of Punjab and HDFC Bank directors approvemerger talks 
New Delhi
: The board of directors of Centurion Bank of Punjab and HDFC Bank,who met separately today have accorded an in-principle approval to pursue merger talks.According to HDFC bank sources, the proposed merger has been lead by Housing andDevelopment Finance Corporation (HDFC) chairman Deepak Parekh whomasterminded the HDFC Bank's acquisition of Times Bank in November 1999, andCenturion Bank of Punjab chairman Rana Talwar, and Ambit CEO Ashok Wadhwa.HDFC Bank is one of the largest private sector lenders in the country, with 746 branches. Centurion Bank of Punjab is smaller, with 394 branches.The merged entity would rank third in terms of size of a banking entity in the country, just behind State Bank of India (SBI) and ICICI Bank.This will be the second major merger for Centurion Bank of Punjab, which had previously merged Lord Krishna Bank with itself in August 2007. Ther bank wasformed thfough the merger of centurion Bank and Bank of Punjab in June 2005.In case the merger takes place, it would result in a combined entity that would be thethird largest in the country, with an estimated market capitalisation of aroundRs63,000 crore, if one was to go by current market values. HDFC bank is the third-most valued bank in India, at over Rs52,000 crore. Centurion Bank of Punjab is presently ranks tenth in India, with a market capitalisation of around Rs10,500 crore.The deal is suggested to be an all-stock deal, with a swap ratio that would reportedlynet a Centurion Bank of Punjab shareholder one share of HDFC Bank for every 20shares. The exact ratio would be announced later.HDFC Bank, with Centurion's branches as part of its network, will surpass ICICIBank's count of branches, and will have a significant presence in the northern andsouthern regions of the country, by around doubling its presence. Centurion Bank of Punjab has a 170-branch network in the north, and another 140-odd branches in thesouth. HDFC has around 250 branches in the north, and around 150 in the south.Centurion Bank of Punjab has a stronger portfolio of small and medium enterprises,compared to a largely retail customer base of HDFC Bank. Reports indicate that werethe merger to go through, it would be a win-win situation for both, in terms of assetsize, as well as a larger banking footprint, in an increasingly competitive market.
Capital adequacy for HDFC Bank stands at 13.8 per cent, and for Centurion Bank of Punjab at 11.5 per cent, which according to analysts is a good thing for creating astrong banking entity.
HDFC Bank approves merger share swap ratio of 1: 29Centurion Bank of Punjab shares
: At its meeting held inMumbai this morning, the Board of HDFC Bank has approved a share swap ratio for acquiring the country's fourth largest private bank, Centurion Bank of Punjab, at oneequity share of Rs10 of HDFC Bank for every 29 equity shares of Centurion Bank of Punjab of a face value of Re1.On Saturday, 23 February, the board of directors of Centurion Bank of Punjab andHDFC Bank, met separately and accorded an in-principle approval to pursue merger talks (
)The merger ratio, subject to due diligence to be conducted, was worked out by the joint valuation report submitted by accounting firm Ernst & Young Pvt Ltd and Dalal& Shah, chartered accountants.The board noted that in the event of the merger, it would consider to its promoter,Housing Development Finance Corporation Ltd, to enable HDFC to maintain itsshareholding percentage in the bank.HDFC Ltd, HDFC Investments and HDFC Holdings jointly own 23.28 per cent inHDFC Bank and FII's own 26.57 per cent. Domestic mutual funds and insurancefirms jointly own another 6.20 per cent, while the central and state governments own1.08 per centThe bank's board will meet on 28 February to consider the draft scheme of amalgamation and due diligence report.The board also said that in the event of transaction being concluded, HDFC Bank Ltdwould make a preferential offer to its parent, Housing Development FinanceCorporation Ltd (HDFC), to enable it to maintain its shareholding percentage in theBank.The announcement of the share swap ratio saw the HDFC Bank scrip rise to Rs1,524(+3.33 per cent), while that of CBoP declined to Rs52.30 (-7.27 per cent).The merger with Centurion, ranked fourth among private sector banks, will propelHDFC Bank to become the third largest bank in the country with the largest branchnetwork among private banks.

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