The battle for the control of Mindtree Ltd is hotting up with the promoters of the technology company deciding to “unconditionally oppose the reported hostile takeover bid by Larsen & Toubro Ltd”.
“We remain 100 per cent committed to our long-term vision of building an independent company. We believe it’s in the best interests of our shareholders, Mindtree Minds, and our organization overall to continue opposing this takeover attempt,” the promoters said. However, the stake held by promoters of Mindtree is only 13.32 per cent, making it an easy takeover target.
L&T on Monday said that it has entered into an agreement with VG Siddhartha and his related entities — Coffee Day Trading Limited and Coffee Day Enterprises Limited — to acquire 20.32 per cent stake in the technology firm at Rs 980 per share aggregating to approximately Rs 3,269 crore. The three-stage takeover, involving market purchases and open offer, is expected to cost L&T over Rs 10,000 crore. L&T is aiming for 66.32 per cent stake in Mindtree.
According to the promoters, a hostile takeover by L&T, “could undo all of the progress we’ve made and immensely set our organization back.” “We don’t see any strategic advantage in the transaction and strongly believe that the transaction will be value destructive for all shareholders,” they said. The promoters of Mindtree are: Krishnakumar Natarajan (executive chairman), Subroto Bagchi (co-founder), Rostow Ravanan (CEO) and Parthasarathy NS (executive vice chairman and COO).
“The attempted hostile takeover bid of Mindtree by Larsen & Toubro is a grave threat to the unique organization we have collectively built over 20 years. Since we started the company in 1999, we have built a rock-solid organization that outperforms its peers in IT services, differentiates and innovates through digital, and consistently delivers strong financial results and favorable returns to our shareholders,” they said.
“We’ve also carefully created a differentiated corporate culture made up of our amazing ‘Mindtree Minds,’ which reached the 20,000 milestone this year,” they said. “Our collective success depends on building and nurturing relationships with our clients and partners. This unexplainable transaction will bring disruption to those relationships and impair Mindtree’s ability to differentiate itself in the market and continue to deliver client value and great shareholder return. We believe that culture needs to be carefully created and nurtured over time, and can’t be bought and sold like any asset,” Mindtree promoters said.
Speaking to newspersons in Bengaluru, Mindtree’s executive chairman Natarajan put forth five questions to L&T. “You are a company with a turnover of Rs 120,000 crore, you are 18 times the size of Mindtree. Why can’t you build a great technology business with your resources and capability without disseminating another organisation?” he asked.
Rustow Ravanan, MD & CEO, Mindtree Ltd later told analysts over a conference call that while the company is not passing any comments on L&T’s culture, which is an organisation of high repute carrying a rich legacy and heritage, it is just that Mindtree’s value systems and culture is different and that it will not thrive under another organisation.
The stock of Mindtree declined 2.03 per cent to close at Rs 943 on the BSE. Shares of L&T fell by 1.60 per cent to close at Rs 1,356.75. However, shares of L&T Infotech rose by 3.99 per cent to settle at Rs 1,636.05 per unit.