Federal Bank, Catholic Syrian close to share swap deal

The merger process of the two Kerala-based private banks — Catholic Syrian bank (CSB) and the Federal Bank — is likely to materialise soon with a swap arrangement in the works.

Under the proposed arrangement, the large shareholders of CSB have asked for two Federal Bank equity shares for each of CSB, according to sources close to the board of directors of Thrissur-based CSB. Besides, they have also demanded protection for CSB’s employees.

Federal Bank has agreed to exchange 1.75 shares for one share of CSB and also expressed its readiness to meet the other demands, including protection to CSB employees, the sources said.

The Aluva-based Federal Bank has also offered the ‘best of both the banks’ to the employees of CSB in the event of a merger. With this offer, the opposition of CSB employees to the proposed merger also seems to have dampened, the sources said.

Over 45 per cent of the CSB shareholders are reportedly in favour of the merger under the swap arrangement, the sources said.

Despite its reported rejection to consider the merger at its earlier two meetings, the CSB board at its last meeting held in Chennai had appointed a committee of four directors to study the proposal, the sources said. They added that the committee will submit its report to the board of directors which will meet here on March 24.

BS Reporter adds: When contacted, Federal Bank Chiarman M Venugopalan said he did not want to comment on the issue.

Federal Bank holds a 4.99 per cent stake in CSB, which it had bought from Thailand-based Surachan Chawla who had in 1994 bought a 38 per cent stake in the bank. It was only earlier this year that the Reserve Bank of India approved the share transfer, subject to the condition that Chawla only hold 10 per cent according to the bank ownership norms of the regulator.

Chawla now has a 27 per cent stake after a rights issue. There is a mutual understanding between him and Federal Bank to sell the remaining shares.

The Archdiocese of Thrissur, who is a major shareholder of CSB, was earlier opposing the merger, even though the CSB board had given an in-principle nod to the proposal.

The four-member committee, set up by the CSB board, was evolving a formula to drive away the apprehensions of the church. The church’s stand was that CSB should continue as a Thrissur- based bank.