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Boards okay Centurion Bank-20th Century Fin merger; TCFC owners to get 1:1

The boards of directors of 20th Century Finance Corporation Limited and Centurion Bank Limited have approved the scheme of amalgamation for the merger of the two companies.

According to the merger plan, the investment businesses of TCFC will be demerged into TCFC Finance Limited while the operating business of TCFC will merge with CBL.

The board of directors of TCFC have thus approved the composite scheme of the arrangement between TCFC and TCFC Finance Limited and their respective shareholders with respect to transfer of investment division of TCFC to TCFC Finance Limited (under Sections 391 and 394 of the Companies Act, 1956) and the amalgamation between TCFC Holdings Limited and TCFC Finance Limited (under Sections 391 and 394 of the Companies Act, 1956).

Both the composite scheme of arrangement and the amalgamation scheme will be effective on obtaining all approvals, including the court approval.

With respect to the demerger, TCFC proposes to hive off its investment division to TCFC Finance Limited. This investment division consists of all strategic investments, bought-out equity transactions, private equity investments and market investments.

The exchange ratio for the demerger that has been approved by the board is 10:6, a shareholder in TCFC will receive six fully paid-up equity shares of Rs 10 each of TCFC Finance Limited for every 10 equity shares held by the shareholder in TCFC. As a result, the capital base of TCFC Finance Limited after the demerger will be Rs 104.8 million.

The demerged TCFC will be merged with CBL. The exchange ratio that has been approved by the boards of both TCFC and CBL is 1:1 a shareholder of TCFC will receive one equity share of Rs 10 each of CBL for every one share of TCFC.

The regulatory authority has conveyed its 'in-principle' approval to the bank for the merger of the operating businesses of TCFC with CBL. In effect, CBL will issue equity shares of Rs 174.7 million to the shareholders of TCFC for acquisition of the operating businesses, including all assets and liabilities other than that of the investment division.

As a result of the above merger, CBL will acquire the entire corporate, lease and hire purchase portfolio as well as consumer finance businesses of TCFC including all assets and liabilities, branches, manpower, technology infrastructure, management skills which will strengthen the bank's position significantly.

Commenting on the merger, D N Ghosh, chairman, Centurion Bank said, ''This merger will establish CBL as a major player in the consumer finance market with significant asset addition also in the corporate finance segment. The strong access to low-cost funding that Centurion Bank has, coupled with the high growth-high margin retail financing business that TCFC is involved in, provides a strong foundation for a consolidated operation.''

The merger will also result in other synergies including reduction in cost of funding, achieving economies of scale, eliminating duplication of businesses and an all-India presence for the bank.

Each shareholder of TCFC will get six shares of TCFC Finance Limited for ten equity shares in TCFC along with one share of the bank for every one share of TCFC.

UNI

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