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Centurion Bank of Punjab announces acquisition

India's private equity-owned Centurion Bank of Punjab to take over Lord Krishna Bank strengthening its position in South India; transaction value estimated at Rs3 billion ($64.5 million).
IndiaÆs Centurion Bank of Punjab (Centurion BOP) announced on Saturday, August 19 that it had honed in on privately-held Lord Krishna Bank as its next target. Centurion BOPÆs board will meet on September 4 to finalise details. It did not disclose the size of the transaction but market sources place it at around Rs3 billion ($64.5 million). The transaction is likely to take the form of a share swap.

Centurion BOP, which is itself a turn around success story after its acquisition by the private equity fund started by Sabre Capital (launched by Rana Talwar, formerly head of Standard Chartered Bank), has already consummated one acquisition in the last 12 months, the Bank of Punjab. It has been on the prowl for another target to continue to grow its retail presence. Currently, Centurion BOP has 249 branches.

Shailendra Bhandari, managing director, Centurion BOP says: "Growing by inorganic means is an important component of our strategy and the proposed merger with Lord Krishna Bank would further improve our franchise and customer proposition across the country, particularly in North India, Karnataka, Kerala and Maharashtra".

Lord Krishna Bank is based in one of IndiaÆs southernmost states, Kerala. It has a network of 112 branches of which 65 are in Kerala. It is not listed and is 65% owned by its promoter, Mohan Puri. The Burnman family (which owns well known ayurveda company Dabur) also has a stake. Earlier Lord Krishna Bank had explored other takeover proposals and last year was in merger discussions with Federal Bank.

The post-merger entity will have exceptionally strong penetration in Punjab and Kerala.

Centurion had merged with Bank of Punjab in October 2005. Bhandari comments ôhaving successfully completed the integration process of the Bank of Punjab with the erstwhile Centurion Bank we believe we are uniquely placed to tap the synergies that exist between Lord Krishna Bank and ourselvesö. Centurion BOP announced a net profit of Rs878 million for the fiscal year ended March 31, 2006, up significantly from the previous year.

Sabre Capital joined hands with Bank of Muscat in 2003 to take over Centurion Bank. Centurion BOP has continued to raise private equity to finance both capital adequacy requirements and its growth strategy. It announced in March this year that Citigroup Venture Capital and the India Value Fund would jointly be investing Rs2.5 billion at a price of Rs19.25 per share. Just 3 months later in June it raised Rs1.3 billion by allotting shares at the same price to ChrysCapital.

Ambit Corporate Finance (which was sole advisor on the Bank of Punjab merger) advised Centurion BOP while DSP Merrill Lynch advised Lord Krishna Bank. Centurion BOP's stock price went up 1.5% on Friday to close at Rs.23.40.

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