Fairfax to acquire 51% in Catholic Syrian Bank

The deal, which sets the stage for the first ever takeover of a bank by a foreign institution, has been valued at Rs 140 a share.

business Updated: Feb 18, 2018 08:51 IST
Gopika Gopakumar
Gopika Gopakumar
Mumbai, LiveMint
Fairfax,Catholic Syrian Bank,Kerala-based lender
For the September quarter, Catholic Syrian Bank made a loss of Rs 13 crore compared to a profit of Rs 53 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%.

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 Rs 140 a share -- which translates into a deal value of around Rs 578 crore, according to Mint calculations.

The deal is subject to shareholder and regulatory approvals, the statement said. A price of Rs 140 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 May 31, 2017 Mint article, CSB was expecting a valuation of Rs 180-200 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 Rs 165 per share.

CSB’s book value at the end of March, 2017 was Rs 123.5 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 January 22 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 source on condition of anonymity.

For the September quarter, CSB incurred a loss of Rs 13 crore compared to a profit of Rs 53 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%.

First Published: Feb 17, 2018 20:30 IST