India's Centurion Bank of Punjab Ltd. (CBP) will acquire privately held Lord Krishna Bank (LKB) in an all stock deal, its Chief Operating Officer Anil Jaggia has announced.

A leading economic newspaper had valued the deal at about Rs. 300 crore ($ 64.5 million).

Lord Krishna Bank, based in the southern state of Kerala, has 112 branches and commands a strong presence in the region.

Jaggia had said in May that Centurion Bank was planning to acquire other banks to fuel growth and expansion.

Centurion Bank has already obtained shareholders' approval to raise up to Rs. 800 crore ($ 172 million) to fund proposed acquisitions.

On September 4, the boards of directors of both the banks approved the banks' merger subject to all the requisite statutory, regulatory and shareholder approvals, including the approval of the Reserve Bank of India (RBI).

The proposed merger with Lord Krishna Bank firmly establishes Centurion Bank of Punjab's role as an industry consolidator, Centurion Bank of Punjab chairman, Mr. Rana Talwar, said. We are confident that the proposed merger will accelerate the bank's growth momentum and help it become the best full service bank in the country.

We hope, subject to regulatory approval, the integration will be complete by end of this year, he said, adding the merged entity would continue to be called Centurion Bank of Punjab.

The combined entity will have a strong presence in both south and north India, Talwar said, adding the bank has plans to open 30 more branches across the country.

Talwar also said Centurion Bank will raise about Rs. 400 crore through a preferential allotment of shares.

Centurion Bank will allot shares to ICICI Venture Funds Management at Rs. 24.54 per share, and to Bank Muscat at a price not exceeding Rs. 25 per share, he said.

It will issue 75 million shares to ICICI Venture Funds and 95 million shares to Bank Muscat.

Centurion Bank's chairman, Mr. Talwar, and managing director and chief executive officer, Mr. Shailendra Bhandari, will continue to hold their respective posts in the merged entity. It has also been proposed that LKB director, Mr. Mohan Puri, would join the board of Centurion Bank of Punjab, subject to regulatory approvals.

The share swap ratio has been fixed at 5:7. In other words, for every five shares of Lord Krishna Bank, its shareholders would receive seven shares of Centurion Bank of Punjab.

The proposed merger is in the best interests of all the stake holders, customers, employees and shareholders, as all of them would greatly benefit from being part of a larger, rapidly growing bank, Mr. Puri said.

The merger will not result in retrenchment of staff of either of the banks or closure of any rural branches, a joint statement by both banks said.

Centurion Bank of Punjab will have an extraordinary general meeting (EGM) of its shareholders on September 30 and Lord Krishna Bank will have the annual general meeting (AGM) of its shareholders on the same day. Both banks will seek approvals for the merger from their respective shareholders at these meetings.

India