PNB apprises board of developments related to PNB Housing-Carlyle deal

NEW DELHI: State-owned Punjab National Bank (PNB) on Friday apprised its board members about the developments with regard to proposed investment of Rs 4,000 crore by US-based private equity firm Carlyle and others in its mortgage arm PNB Housing Finance.

According to sources, although it was not part of the agenda, a status report was presented to the board about the PNB Housing Finance and Carlyle deal amid regulatory concerns.

Earlier this week, PNB Housing Finance held shareholders’ meeting for seeking approval for the deal.

However, outcome of the meeting would be disclosed after Securities Appellate Tribunal (SAT) order.

As the Rs 4,000 crore Carlyle-led deal has mired into a controversy and the matter has now reached the SAT, the company has been restrained to announce the voting results about the preference issue pending disposal of the matter next month.

The deal was announced on May 31, subject to shareholders’ and other regulatory approvals.

The mortgage firm had moved the tribunal on Monday after capital markets regulator Sebi on June 18 asked it not to go ahead with the proposed capital raise by allotting preference shares to the investors until it carried out a valuation of shares from an independent registered valuer.

The SAT, in an order dated June 21, allowed the company to go ahead with the extraordinary general meeting (EGM), but restricted it from announcing the voting results.

The housing finance company, promoted by PNB, ran into trouble as concerns were raised about its preference issue of shares to a set of investors led by Carlyle Group, and that it was not in the interest of minority shareholders and the promoter.

An EGM was called on June 22 to seek approval of shareholders, among other issues.

Once the deal is completed, the stake of Carlyle Group in the mortgage firm will rise to 50.16 per cent from 32.21 per cent, a development that would trigger an open offer, while PNB’s stake would come down to 20.28 per cent from the existing 32.64 per cent.

Last week, Carlyle Group along with other entities floated a ‘draft letter offer’ with regard to the open offer for acquisition of over 7 crore equity shares representing 26 per cent stake in PNB Housing Finance.

An open offer is a mandatory offer that an acquirer and Persons Acting in Concert (PACs) have to make to the shareholders of a company in case the former acquires more than 25 per cent stake in the company, as per Sebi regulations.

In case of creeping acquisition too, the clause of open offer kicks in when an entity or PACs makes an acquisition of more than 5 per cent stake in a company in a year.

Meanwhile, there are reports of conflict of interest of directors on the board of PNB Housing Finance as they have some direct or indirect connection with Carlyle.

Earlier this month, proxy advisory firm SES said the proposed deal was an “unfair transaction” which was against public shareholders as well as the promoter bank PNB and also flagged concerns about the proposal to re-appoint two independent directors.