Blackstone Acquires a 9.99% Stake in Federal Bank
The Competition Commission of India (CCI) has given the green light for private equity titan, Blackstone, to acquire a 9.99% stake in Federal Bank. The US-based private equity giant will carry out this investment through its affiliate, Asia II Topco XIII. The affiliate will subscribe to warrants that can be converted into an equal number of fully paid equity shares of Federal Bank, according to the CCI.
Details of the Deal
Once all the warrants are exercised, Asia II Topco XIII will own 9.99% of Federal Bank’s paid-up share capital on a fully diluted basis. Under the terms of the deal, Blackstone will be entitled to nominate one director to Federal Bank’s board, provided its shareholding remains at or above 5%. It should be noted that Asia II Topco XIII is controlled by funds advised or managed by affiliates of Blackstone.
Federal Bank Overview
Federal Bank is a private sector commercial bank in India that provides an array of banking products such as payment services, deposits, and loans. Blackstone had earlier announced that it would invest Rs61.9bn (about $705m at the time of announcement) in the Kochi-headquartered private lender.
Investments in India’s Private Banking Space
The transaction adds to a recent wave of strategic and financial investments in India’s private banking space. In October, Dubai-based Emirates NBD agreed to buy a 60% stake in RBL Bank for close to $3bn. Japan’s Sumitomo Mitsui Banking Corporation has also been increasing its exposure to Indian banks, acquiring 20% in Yes Bank in May and subsequently adding another 4.2% in September.
Other Investments
In a separate development, Mitsubishi UFJ Financial Group’s consolidated subsidiary MUFG Bank recently signed an investment agreement with Indian non-banking financial company Shriram Finance to subscribe to a preferential allotment of 20% equity shares. The total investment is valued at approximately Rs396.2bn, pending regulatory clearance.
This recent wave of acquisitions and investments in India’s private banking space demonstrates the growing interest from global financial institutions in India’s banking and financial sector. The move by Blackstone to acquire a stake in Federal Bank is a strategic one that could potentially provide the private equity giant with significant returns in the future.
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