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Shares of IT services company Mindtree Ltd and conglomerate Larsen & Toubro Ltd (L&T) fell on Tuesday after L&T said it agreed to buy a fifth of Mindtree and aimed for a much bigger stake via market deals and an open offer.
The Mindtree stocks ended lower by 2.03 per cent in the BSE index Sensex at Rs 943, while the stock of L&T Ltd ended lower at 1,356.75 down 1.6 per cent.
L&T said it would buy a 20.32 per cent stake in Mindtree from coffee baron V G Siddhartha and companies related to him - Coffee Day Enterprises and Coffee Day Trading.
Mumbai-based L&T said it placed an order with its broker for an on-market purchase of up to 15 percent of Mindtree's shares at 980 rupees each. It is looking for an additional 31 percent stake from Mindtree's public shareholders at the same price.
“The attempted hostile takeover bid ... is a grave threat to the unique organization we have collectively built over 20 years,” the promoters of Mindtree said in a statement. “We don't see any strategic advantage in the transaction and strongly believe that the transaction will be value destructive for all shareholders.”
However, some analysts were slightly more optimistic given the deal did not involve the integration of Mindtree into L&T. “While a hypothetical 'delayed' merger will have different dynamics based on its contours, it should not be as negative as an immediate merger for the combined firm,” said Sudheer Guntupalli, an analyst with Ambit Capital in Mumbai.
The conglomerate will pay Rs 980 per Mindtree share, valuing the stake at 32.69 billion rupees ($477.1 million), L&T said late on Monday.
If the deals go through, L&T will be spending up to 107.3 billion rupees to buy around 66 percent stake in Mindtree, L&T said in an investor presentation on Tuesday, adding that it would fund the transactions entirely. Mindtree will continue to operate as an independent listed entity post the acquisition, L&T said.
L&T already owns a 74.8 per cent stake in IT consultancy firm Larsen & Toubro Infotech Ltd. L&T's deal is at premium of 1.8 per cent to Mindtree's closing price of Rs 962.50 on Monday. Local media reported about the potential stake deal over the weekend.
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