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HDFC Bank, Centurion boards okay merger (Business Standard 25th Feb 2008)The boards of directors of HDFC Bank and Centurion Bank of Punjab (CBoP) today separately gave their in-principle approvals for merger of the two banks. HDFC Bank is expected to pay Rs 10,000-Rs 12,000 crore in shares for absorbing CBoP. Independent firms — Dalal & Shah and Ernst & Young — appointed by the two banks would work over the weekend to prepare their reports on the valuation of CBoP in time for boards of the two banks to consider when they meet again on Monday (February 25) to consider the swap ratio for the all-stock deal. The boards of both banks will meet on February 25 to consider the swap ratio and on February 28, to consider the draft scheme of amalgamation and any other matters as required. Consulting firm KPMG is the advisor to HDFC Bank and investment bank Ambit Corporate Finance to Centurion Bank. “ The swap ratio is expected to be around 1:25-30,” said a banking source. The merger will make HDFC Bank the country’s seventh largest bank after Bank of India (BoI) and ahead of IDBI Bank, from the current 10th position. The merger talks between the two banks began in January 2008 after the principal shareholders of CBoP – Bank Muscat with 14.02 per cent stake, Sabre Capital with 3.48 per cent stake and Kephinance Investment (Mauritius) with 6.13 per cent — decided to exit. The three had signed a shareholders’ agreement in 2003, which provided that any decision to sell the stake would be taken together. HDFC Bank is hopeful of completing the integration process in about five to seven months. The merged entity will not offer home loans as this would lead to a conflict of interest with HDFC Bank’s parent, Housing Development Finance Corporation (HDFC). HDFC Bank will have the option to sell the home loan portfolio of CBoP to HDFC. HDFC holds 23.28 per cent stake in HDFC Bank. Its holding is expected to fall below 20 per cent after the merger. Banking sources said HDFC would approach RBI to allow HDFC to maintain its stake at 20 per cent. HDFC Bank, like in the past, could make a preferential offer to HDFC, which had earlier indicated that it would want to hold at least 20 per cent stake in the bank at all times. A senior HDFC Bank official indicated that Rana Talwar, the chairman of Centurion, will have no role to play in the merged entity. Shailendra Bhandari, the managing director and CEO of Centurion will be appointed as a member of the merged bank and will have no role in the day-to-day operations of the bank. Bhandari will help in the process of integrating the two entities.” The official added, “There is no scope for appointment of a deputy managing director (in the merged entity).” HDFC will continue to have two representatives on the board of the merged entity.” More

HDFC Bank, CBoP merger ratio at 1:29 (Business Standard 25th Feb 2008)
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. More

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