Heavy engineering major Larsen & Toubro (L&T) Monday said that it has entered into a definitive share purchase agreement (SPA) with V G Siddhartha and his related entities – Coffee Day Trading and Coffee Day Enterprises – to acquire a 20.32 per cent stake in Mindtree at Rs 980 per share, aggregating to approximately Rs 3,269 crore.
In a late evening filing to stock exchanges, L&T said, “Immediately following the filing of the public announcement, L&T has 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 Rs 980 per share.” It further said, “Pursuant to execution of the share purchase agreement, aforementioned market order for share purchase and with the intent to acquire majority stake in Mindtree, L&T has announced an open offer as per the Sebi’s takeover regulations to the public shareholder of Mindtree to purchase up to an additional 31 per cent of the outstanding shares of Mindtree at a price of Rs 980 per share in cash.”
If the SPA and the open offer goes through, L&T’s stake in Mindtree will stand at 66.32 per cent, giving it the controlling stake in the company. In a separate filing, Mindtree also said it has received L&T’s proposal for an open offer representing 31 per cent of the voting share capital.
L&T further informed the exchanges that Mindtree would remain an independent listed entity, and L&T would extend support to Mindtree in its business going forward. “Mindtree will benefit from access to larger client base and wider product offering under a common parentage giving higher returns to shareholders of Mindtree,” the L&T filing said.
The price of Rs 980 a piece will be about a 2 per cent premium to Mindtree’s Monday’s closing share price of Rs 962.50 on the BSE. The share price closed up 1.74 per cent on Monday.
Mindtree is a technology consulting and services company that began in 1999. Currently, it has a market capitalisation of Rs 15,806 crore. During FY18, Mindtree’s net profit stood at Rs 570 crore up 37 per cent over a year ago, while the revenues at Rs 5,463 crore, were up 4.33 per cent versus FY17. The company’s Ebitda (earnings before interest, tax, depreciation and amortisation) was up 3.34 per cent at Rs 741 crore in FY18.
Last Friday, Mindtree informed exchanges that its board will meet on March 20 to consider the proposal of a buyback of shares of the company. The move was seen as an attempt by the management to prevent any hostile takeover bid of the company. Later on Saturday, Krishnakumar Natarajan, chairman and co-founder, Mindtree had reportedly written to the L&T board against ‘hostile takeover’ of Mindtree and said that it had alarmed stakeholders, institutional investors, customers and even employees.
Natarajan also argued that several large IT services providers had failed to integrate acquisitions and said a merger between Mindtree and L&T Infotech would be value destructive for all.
Later, on Sunday, Mindtree co-founder and board member Subroto Bagchi said he had quit as chairman of the Odisha Skill Development Agency to help Mindtree steer through the current takeover crises. Bagchi tweeted, “An imminent threat of hostile takeover of Mindtree has made me to resign from the Government to be able to go, save the company. I must protect the tree from people who have arrived with bulldozers and saw chains to cut it down so that in its place, they can build a shopping mall.” He also said that, Mindtree has not been designed as an “asset” to be bought and sold. It is a national resource. It has a unique culture that humanises 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.
L&T Technology Services, part of the L&T Group, is a listed entity and has expertise in engineering design, product development, smart manufacturing and digitalisation. It has a market capitalisation of Rs 15,504 crore, according to the BSE as on Monday. L&T Infotech is a technology consulting and digital solutions company that claims to have operations in 30 countries, according to its website. It was founded in 1997 as a subsidiary of L&T. The firm has a market capitalisation of Rs 27,289 crore, as per BSE on Monday. —FE