HDFC, CBoP merger gets nod

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New Delhi, Mumbai, Feb 23: It is decided now. The boards of Centurion Bank of Punjab (CBoP) and HDFC Bank on Saturday gave their approval in principle for a merger, kicking off the country’s biggest amalgamation in the banking sector with assets of over Rs 2 lakh crore. Sources close to the development say Rana Talwar of Sabre Capital is likely to be the chairman of the merged entity.

Sources said Talwar sold his stake to HDFC Bank on the condition that he be made the chairman of the new entity. Aditya Puri, it is said, will continue to be the managing director of the merged entity while Shailendra Bhandari, managing director of CboP, will be the joint managing director.

According to an official statement, boards of both the banks “have resolved to pursue the merger subject to satisfactory due diligence, a fair share-swap ratio and all the requisite statutory, regulatory and corporate approvals, including those from the RBI, the stock exchanges, and the respective boards and shareholders of both banks.”

The statement added the boards would meet on Monday to consider the swap ratio after receiving valuation reports. Sources said Ambit Corporate Finance will be the investment banker for the deal. This will be followed by another meeting on Thursday to consider the draft scheme of amalgamation and other matters.

According Deven Choksey, MD, KR Choksey, a leading broking house in Mumbai, “The book value of the merged bank share would be Rs 210 (Rs 9 for CBoP and Rs 201 HDFC Bank) and the share-swap ratio therefore, is expected to be at 1:25 or 1:27”.

Analysts in the market are of the opinion that this deal would indeed be synergistic in nature as CBoP has built strengths in the retail side of the business and HDFC Bank has a strong presence in the corporate sector. And as the deal is being inked, the enterprise value of CBoP is pegged at $3billion or at Rs 64 per share, said sources.

An announcement is expected early Monday before the opening of the markets and discussions could end late at night on Sunday. The meetings will also take into consideration that the banks are listed on exchanges in the country as well as bourses abroad too. While CBoP’s shares are listed on the Luxembourg Stock Exchange, HDFC Bank is a New York Stock Exchange (NYSE) listed company.