HDFC Bank to acquire Centurion Bank in $2.4 billion share-swap deal

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As per the terms of the deal, Centurion Bank shareholders will receive one HDFC Bank share for every 29 Centurion Bank shares.

The Rs.9510 crore ($2.4 billion) share-swap deal, touted as the nation's biggest financial sector buyout, will create a bank with 1,148 branches, surpassing largest private sector bank, ICICI Bank's 955 branches.

Centurion had 394 branches and HDFC Bank 754 branches as on Dec. 31 2007, HDFC Bank said in a regulatory filing, Feb. 22.

However, the merged entity's total advances of about Rs.87,000 crore ($21.75 billion) are far lower than ICICI Bank's Rs.2,20,000 crore ($55 billion).

In terms of assets too, ICICI Bank is much larger than the proposed new entity. While ICICI Bank has assets of Rs.3,76,700 crore ($94.2 billion), the proposed combined entity would have over Rs.1,10,000 crore ($27.5 billion).

The combined entity could have a market capitalization of about Rs.63,000 crore ($15.75 billion), based on their current market values. On the other hand, ICICI Bank is valued at $30.7 billion.

"The two Boards 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," a joint statement issued by the banks said.

The merger will allow HDFC Bank to extend its reach in the country before a central bank review next year that may allow foreign banks such as Citigroup and Standard Chartered to buy Indian lenders.

In the past, both HDFC Bank and Centurion Bank aggresively carried out acquisitions. While HDFC Bank bought Times Bank from media publisher Bennett Coleman & Co. in 2000, Centurion, which was rescued by buyout firm Sabre Capital in 2003 after major losses, bought Central Bank of Punjab in 2005 and Lord Krishna Bank in 2006.

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