Mumbai: At its meeting held in Mumbai this morning, the Board of HDFC Bank has approved a share swap ratio for acquiring the country's fourth largest private bank, Centurion Bank of Punjab, at one equity share of Rs10 of HDFC Bank for every 29 equity shares of Centurion Bank of Punjab of a face value of Re1.

On Saturday, 23 February, the board of directors of Centurion Bank of Punjab and HDFC Bank, met separately and accorded an in-principle approval to pursue merger talks (See: Centurion Bank of Punjab and HDFC Bank directors approve merger talks)

The merger ratio, subject to due diligence to be conducted, was worked out by the joint valuation report submitted by accounting firm Ernst & Young Pvt Ltd and Dalal & Shah, chartered accountants.

The board noted that in the event of the merger, it would consider to its promoter, Housing Development Finance Corporation Ltd, to enable HDFC to maintain its shareholding percentage in the bank.

HDFC Ltd, HDFC Investments and HDFC Holdings jointly own 23.28 per cent in HDFC Bank and FII's own 26.57 per cent.  Domestic mutual funds and insurance firms jointly own another 6.20 per cent, while the central and state governments own 1.08 per cent

The bank's board will meet on 28 February to consider the draft scheme of amalgamation and due diligence report.

The board also said that in the event of transaction being concluded, HDFC Bank Ltd would make a preferential offer to its parent, Housing Development Finance Corporation Ltd (HDFC), to enable it to maintain its shareholding percentage in the Bank.

The announcement of the share swap ratio saw the HDFC Bank scrip rise to Rs1,524 (+3.33 per cent), while that of CBoP declined to Rs52.30 (-7.27 per cent).

The merger with Centurion, ranked fourth among private sector banks, will propel HDFC Bank to become the third largest bank in the country with the largest branch network among private banks.

HDFC Bank has a branch network of 754, behind the top private sector lender ICICI Bank's 955-branch network, the second largest bank in the country after State Bank of India. Centurion Bank of Punjab has 394 branches across 180 locations.

Despite being overtaken in terms of a combined branch network of the merged entity, ICICI Bank would continue to be top private sector bank with thrice the assets size at Rs376,700 crore  against Rs110,000 crore of the combined HDFC Bank-Centurion Bank of Punjab.

Centurion Bank of Punjab, created through the merger of Centurion bank and Bank of Punjab in 2005, had also acquired Lord Krishna Bank in August 2006. Its promoters include HSBC Finance, Sabre Capital and Bank of Muscat, which holds the largest equity of 14 per cent.

In November 1999, HDFC Bank had acquired Times Bank, promoted by the owners of the country's largest publishing group, Bennett Coleman & Co, the owner of The Times of India and The Economic Times.