In what is billed as Corporate India’s first hostile takeover bid in the IT sector, Larsen & Toubro Ltd on Monday said it has entered into a definitive share purchase agreement with VG Siddhartha and his related entities, Coffee Day Trading Ltd and Coffee Day Enterprises Ltd, to acquire a 20.32 per cent stake in Mindtree.

L&T will purchase this stake at ₹980 per share, aggregating to approximately ₹3,269 crore.

Immediately following the filing of the public announcement, L&T placed an order with its broker for on-market purchase of up to 15 per cent of share capital of Mindtree at a price not exceeding ₹980 apiece.

It has announced an open offer as per SEBI takeover regulations to the public shareholders of Mindtree to purchase up to an additional 31 per cent of the outstanding shares of Mindtree at a price of ₹980 per share in cash.

This acquisition adds to L&T’s IT services platform with a focus on new-age digital/cloud solutions, making it highly complementary to L&T’s current technology services portfolio, a statement from the company said. Mindtree would remain an independent listed entity, it added.

“This acquisition will help propel L&T’s technology portfolio into the top tier of Indian IT companies. Mindtree has a well-established management team which has earned the respect of the market in terms of its service offerings and business practices,” said SN Subrahmanyan, L&T CEO and Managing Director.

Buyback option

Meanwhile, Mindtree founders are bracing for a pitched battle to stall any such attempts. On March 15, the company’s board said it would meet on March 20 to consider the buyback option. The company’s reserves as of now are around ₹2,800 crore. It means that it can allocate around ₹280 crore for the buyback of the company’s shares and also another ₹700 crore to buy another 25 per cent stake to take control of the company.

Mindtree co-founder Subroto Bagchi on Twitter announced the decision to return from his position as head of Odisha Skill Development Authority. “Mindtree has not been designed as an ‘asset’ to be bought & sold. It is a national resource. It has a unique culture that humanizes the idea of business.

“It sets the standards of corporate governance. I need to be there in its time of difficulty. Hence the hard decision to return,” he tweeted.

Along with Krishnakumar Natarajan, Chairman and co-founder, Rostow Ravanan, CEO, had last week written to L&T against the possible hostile takeover.

“There is a disconnect between the largest shareholder and Board, else why announce the intent for a buyback,” said V Balakrishnan, former Infosys CFO. However, industry watchers believe that the route taken by L&T is within the regulatory ambit and doesn’t violate any takeover rules.

Mindtree shares closed at ₹962, or 1.74 per cent higher when compared to previous day’s close.

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