Centurion Bank.

Tuesday, June 21, 2005

Centurion Bank, BoP boards approve amalgamation
MUMBAI: The consolidation game among private banks was kicked off on June 20, with the boards of Centurion and Bank of Punjab approving a merger of the two banks. The board will meet again on June 29 to discuss the share exchange ratio. BoP will be merged into Centurion, and BoP shareholders will get Centurion Bank shares in accordance with the valuation to be done by KPMG and NM Raiji & Co. Ambit Corporate Finance is the sole investment banker to the Rs 2,000-crore deal. The merged entity will have a new brand, 'Centurion Bank of Punjab', and will concentrate on the retail, SME and agricultural sectors. The merger will be effective as on April 1, '05 or sometime after that. Centurion Bank's chairman Rana Talwar will take over as the chairman of the merged entity, while Centurion Bank's MD Shailendra Bhandari will be the MD of the same.

The merged entity will be well capitalised, have a strong management team and will be able to achieve considerable revenue and cost synergy. The merger will add value. The merged entity will have a wider footprint they were strong in the west and the south and we in the north. BoP would now be able to do more business. All the stakeholders, including employees will benefit in the long run. Consolidation is the need of the hour. Centurion Bank, which has 99 branches and extension counters, has more presence in the south, while BoP with 136 offices is concentrated more in the north. On the BSE, the BoP scrip was up 5.03% to Rs 33.40, while Centurion Bank was up 4.4% at Rs 15.20.

It is difficult to say to what extent the share swap ratio would go in favour of BoP. Centurion has a better management and cleaner balance sheet, while BoP is likely to report a net loss on the fourth quarter of the last fiscal. The profit for the three quarters ending December 31, '04 was at Rs 16.4 crore. In contrast, Centurion Bank posted a net profit of Rs 9.6 crore in the last quarter and Rs 25.1 crore for the fiscal '05. Centurion Bank has a market cap of Rs 1,587.6 crore, while BoP has a market cap of around Rs 350.7 crore. Promoters have 27.02% stake in BoP, while Bank Muscat has the largest stake of 25.91% in Centurion Bank. Rana Talwar's Sabre Capital has a 5.61% stake. Centurion Bank has a staff strength of around 1,500, while BoP employs 1,900 people. There will be no VRS.

After taking over Centurion Bank, Rana Talwar's Sabre Capital along with a clutch of investors have made a capital infusion into the bank. The bank did a rights issue of Rs 90.8 crore in September '04 and a $80m GDR offering in March '05, increasing the bank's networth to Rs 511.4 crore. In February 23, the BoP had approved a preferential issue of 18.78% at Rs 38 per share to a host of investors, including a 4.99% stake sale each to The Bank of Nova Scotia, Canada, Bharati Enterprises (a Bharti Group company), ICB Financial Group Holdings, Switzerland (a Malaysian group). BOP was looking at raising Rs 92.3 crore through the preferential issue, but the issue never went through. The RBI was not comfortable with the preferential allotment made by the BoP and had not given the go-ahead to the bank. The preferential allotment would have helped BoP to cross the RBI-mandated Rs 300 crore networth.
Monday, June 20, 2005

Centurion Bank - Outcome of Board Meeting
Centurion Bank Ltd has informed that the Board of Directors of the Bank at its meeting held on June 20, 2005, has accorded in-principle consent to pursue the merger between Bank of Punjab Ltd and the Bank., subject to satisfactory due diligence, a fair share swap ratio and the receipt of all the requisite statutory, regulatory and corporate approvals, including approvals of the RBI, stock exchanges, the respective Boards and shareholders.

Ambit Corporate Finance Pte. Ltd are the sole investment bankers to this transaction.

KPMG India Private Limited and N.M.Raiji & Co., Chartered Accounts, have been jointly appointed as the independent valuers determine the share swap ratio.

Further the Bank has informed that the Board intends to meet again on June 29, 2005 to consider the terms of the merger and other related documents after receipt of the valuation reports.

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