Prem Watsa-owned Fairfax Holdings Ltd will buy 51% stake in Catholic Syrian Bank, the Kerala-based lender said in a statement on Saturday. The deal, which sets the stage for the first ever takeover of a bank by a foreign institution, has been valued at Rs140 a share. That translates into a deal value of around Rs12,000 crore, according to Mint calculations.
The deal is subject to shareholder and regulatory approvals, the statement said. Fairfax will acquire the stake through a full equity infusion.
A price of Rs140 a share is lower than what the bank had initially expected. The decision to renew deal prospects with Fairfax comes a year after the bank abandoned talks with the financial institution following differences over valuation.
According to a 31 May 2017 Mint report, CSB was expecting a valuation of Rs160 per share plus a control premium of 15%. This valuation was decided based on a benchmark set by a secondary market transaction which involved Enam group’s Vallabh Bhansali, picking up 4% stake in CSB for Rs165 per share. CSB’s book value at the end of March 2017 was Rs123.5 per share.
However, this was far higher than the valuation assigned by Fairfax, which arrived at its estimate after taking into consideration Catholic Syrian Bank’s performance.
Since then, the bank had been in talks with other private equity investors for a private placement and had also floated the idea of raising funds through a qualified institutional placement (QIP). According to a 22 January Times of India report, CSB was in talks with private equity investors like Aion Capital and Everstone Capital for a 30% stake sale.
However the talks fell through as the bank did not get a fair valuation from these investors, said a person who spoke on conditions of anonymity.
For the September quarter, CSB made a loss of Rs13 crore compared to a profit of Rs53 crore during the corresponding period last year. Its net bad loans stood at 6.75% of its loan books and it had a capital adequacy at 11.09%.
Sandip Ginodia , Director
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