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Canbank and Dena Bank may open a joint account
The wave of consolidation sweeping across the Indian banking industry is not confined either to the new generation private sector banks or to their Old World counterparts. If industry buzz is to be believed in less than six months, a mega merger involving heavy weight banks from the staid public sector is likely to be linked The industry has it that Bangalore-based Canara Bank and Mumbai-based Dena Bank are in serious talks for a possible merger. When queried about the deal, senior officials of Canara Bank refused to comment saying “give us some time, maybe a week or more.” Canara Bank chairman, RJ Kamath, has recently gone on record saying that he was keen on acquiring a bank in the country’s western region as his bank was keen on beefing up its presence there. It is not clear who initiated the discussions. Sources, however, reveal that the top bosses of Canara Bank had told officials of the ministry of finance (MoF) that their bank had a “weak” branch network in the western region, which they would like to plug. Dena Bank would be an ideal fit for Canara Bank because it has over 60 per cent of its 1,100 plus branches in the western region; mainly in Maharastra and Gujarat. Interestingly enough, while Canara Bank has not made an entry into the primary market, Dena Bank is a listed entity. The merger route is not clear at this point of time though it is thought that Canara Bank could go for reverse merger with Dena Bank. During the first half of the current fiscal, Dena Bank had deposits of over Rs 13,000 crore and advances of over Rs. 7,100 crore, while Canara Bank had global deposits of Rs. 49959 crore, global advances of Rs 26,266 crore and an operating profit of Rs. 494 crore. Canara Bank’s net profit for the last fiscal was Rs. 236 crore, up 4.9 per cent over the March’99 level, with net NPAs down to 5.3 per cent from 7.1. The combined entity would have over 3,000 branches placing it ahead of its other rivals like Bank of Baroda and Punjab National Bank. According to Banking sources, the government is taking a hard look at Dena Bank which has suffered a reversal of fortune. Its net profit crashed 43 per cent to Rs. 62.9 crore in March’00 with NPAs soaring to 13.5 per cent from 7.7. However, unlike other public sector bank’s like Uco Bank, it is still possible to bail it out before the situation slips out of hand. The question is whether Canara Bank is the right entity to do it. If thedeal does go through, it would add to the already full platter confronting Canara Bank’s top management. The bank’s VRS will be opened on January 1. Besides this, the bank has initiated talks with leading international banks and financial institution for offering a stake in its asset management company (AMC). Canara Bank is also looking at taking distributorship of insurance products.

SEBI panel to decide on pricing of open offers
The Securities and Exchange Board of India (Sebi) panel on takeover will consider whether a company going for public offer should offer shares at the highest price it paid while acquiring shares of the target company. "The Committee will consider whether price paid by the acquire to buy shares of the company at any time prior to public announcement should be considered for determining the offer price," senior Sebi officials said. This would mean that an acquirer will have to offer the highest price he ever paid to pick up the shares in a public offer. Under the present regulation, a company making a public offer has to price the offer at the 26-week average closing price preceding the public announcement. This issue has come up in the light of the recent case where Gujarat Ambuja bought out Tata's stake in ACC at a premium to the market price. If this proposal goes through, Gujarat Ambuja, if deciding to make a public offer, will have to price it at Rs. 370 per share -- The price it paid Tatas. The panel will also discuss various issues relating to control of a company. It will consider whether to continue the existing provisions under Regulation 12, which allows change in control without open offer if approved by shareholders by an ordinary resolution. If so, should the provision be strengthened by substituting special resolution in the place of ordinary resolution and by placing additional stipulations such as interested party having to abstain from voting and also allowing to vote through postal ballots. The panel will also consider whether transfer of shares between promoters need to be exempted from public offer obligations as is the case now, even if it changes the very character of the company, for example, exit of an MNC or a strong Indian partner, Sebi officials said. The panel will also look in to the payment by acquirer to shareholder who participated in the public offer. Under the current regulation, acquirer can pay the consideration in cash or in exchange of shares of acquirer company if listed or A-rated debt securities or a combination of all three. The Bhagwati panel will consider whether the payment should be restricted to cash, the officials said. It will also look into the issue of indirect acquisition of shares or control in an Indian listed company by an overseas acquirer through two or three intermediaries, each of whom is situated in different jurisdiction. The panel will also consider the exemption clause for control through merger / demerger route. The existing provisions give automatic exemption from open offer to all the cases of direct or indirect acquisition of shares and control pursuant to merger / demerger / scheme of arrangement under any law, Indian or foreign. The panel will consider whether exemption from open offer be confined to merger and demerger scheme of arrangement under Indian laws only. In the cases of international merger / demerger, it may not be covered under automatic exemption but could be considered by the panel on a case-to-case basis. The group will meet industry association and investor association on December 13, and the parties involved in hostile takeover on December 14 to elicit their view on some of the contentious issues like raising the creeping acquisition limit and also the minimum offer size

A change in the ownership of a company without an open offer may soon require a special resolution where interested parties would have to abstain from voting even as other outstation shareholders are provided the facility of a postal ballot. Currently, changes in control without an open offer are allowed if approved by shareholders in an ordinary resolution. The issue, along with several others like the point at which the acquirer should be allowed control, are to be discussed at the Bhagawati panel meet on takeovers on December 13, 14,and 15, 2000, according to the agenda notes for the meeting. The committee is also expected to deliberate on whether a fresh open offer would be required if control is attained at a date subsequent to the post open offer period in case where an initial open offer doesn’t result in the acquirer getting control. Transfers from joint to sole control a higher than market price is also expected to be considered by the committee. Currently only transfers at below market prices are subject to regulation. A related issue, which will be discussed with industry association and corporates, is whether such a transfer should be exempted from a compulsory open offer. Even if it changes the very character of the company. The committee will also consider whether the creeping acquisition limit of 5 per cent should be increased or reduced. Creeping acquisition without any limit subject to disclosures on every incremental one per cent bought, along with safeguards like compulsory lock-in of these shares bought but without attracting the open offer provision, are also expected to come up for discussion. On the agenda of the Securities & Exchange Board of India (Sebi) appointed panel is fixing the differential creeping acquisition limit for promoters/persons in control as compared to other major shareholders. A move to make open offers cash only, is also being considered. The open offer pricing is also a matter of debate. The acquirer may a asked to offer the highest price paid by him at any time prior to the public announcement rather than just the highest price in the 26 weeks prior to the public announcement date. Whether the take-over code regulations can be enforced against an ultimate overseas acquirer, who may have acquired the Indian company via tqo to three intermediaries situated in different jurisdictions, will also be considered. Source: The Economic Times Dated: 12th December 2000

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