Banking | Federal Bank starts due diligence of CSB

Banking | Federal Bank starts due diligence of CSB
Comment E-mail Print Share
First Published: Tue, Sep 22 2009. 11 04 PM IST
Updated: Tue, Sep 22 2009. 11 04 PM IST
Kochi: Kerala’s largest private bank Federal Bank Ltd on Tuesday said in a filing to the Bombay Stock Exchange (BSE) that following board approval on Sunday, it has started financial due diligence of Catholic Syrian Bank (CSB) for a merger.
This is the first official acknowledgement of a takeover by Federal Bank, which had picked up a 5% stake in the Kerala-based CSB in mid-2008.
M. Venugopalan, managing director of Federal Bank, and R. Venkataraman, managing director of CSB, were not available for comment. A personal familiar with the development said global management consultancy KPMG would conduct the due diligence.
A CSB board member, on condition of anonymity, said the process would take no more than a week and that the takeover would likely be completed by October.
At a June meeting in Chennai, some board members of both banks had arrived at a swap ratio of 1:1.25 or 1:1.5 whereby every share of CSB would fetch 1.25-1.5 Federal Bank shares. The combined entity is expected to have a total business of Rs65,000 crore and credit of more than Rs25,000 crore. Employee strength will touch 10,000 across 1,000 branches.
While it has been more than a year since the takeover plans began, the annual general meeting of CSB in late August paved the way for the takeover proposal when Iype Peter, Samir Bhasin and T.S. Anantharaman replaced three outgoing directors who were said to be opposed to the merger.
With the air cleared, the Federal Bank board on Sunday approved the plan and informed CSB of its intention to go ahead with the due diligence prior to the takeover.
Federal Bank had four years ago tried unsuccessfully to take over Kerala-based Lord Krishna Bank, which later merged with Centurion Bank of Punjab and finally with HDFC Bank.
Thailand-based non-resident Indian (NRI) Surachan Chawla had bought 43 lakh shares in 1994 to acquire a 38% stake in CSB. However, neither the Foreign Investment Promotion Board nor the baking regulator Reserve Bank of India approved the share transfer, Following a challenge by Chawla, RBI in early 2008 approved the share transfer subject to condition that he would only hold 10% equity and sell the rest. Federal Bank subsequently bought a 4.99% stake from Chawla, who currently still holds 21% stake.
Comment E-mail Print Share
First Published: Tue, Sep 22 2009. 11 04 PM IST