Larsen & Toubro Ltd (L&T) made an open offer on Tuesday to acquire a 31 per cent stake in IT services firm Mindtree Ltd for Rs 5,030 crore. L&T has offered Rs 980 a share in the offer that is scheduled to start on May 14 and close on May 27, the company informed the shareholders of the latter.
An open offer is essentially an offer to buy shares from the company’s public shareholders. Mindtree’s committee of independent directors has time till May 10 to give their recommendation to the company’s shareholders with regards to the open offer by India’s largest engineering company.
Why is this important?
L&T’s offer comes on a day when independent directors of the Bangalore-based IT firm Mindtree Ltd are slated to meet, ahead of a meeting of the company’s board, to decide on whether to proceed with a share buyback proposal and also consider L&T’s open offer.
The open offer is at a premium over the current trading price of the Mindtree stock. Shares in Mindtree ended 1.1 per cent higher at Rs. 950.55 apiece on the BSE on Tuesday, while L&T was down 0.4 per cent at Rs. 1372.10.
L&T’s open offer comes after the engineering major agreed to buy Cafe Coffee Day founder VG Siddhartha’s 20.32 per cent stake for Rs 3,269 crore on March 18, further announcing plans to buy a total of 67 per cent in Mindtree for roughly Rs 10,700 crore.
The founders of Mindtree, who together constitute 13.32 per cent of ownership in the company, are trying to ward off this ‘hostile takeover bid’ by buying back shares from public shareholders.
Can the Mindtree founders thwart the L&T bid
There are limited tools through which Mindtree can prevent an acquisition, given that the founders hold a little over 13 per cent stake. The shareholder meet of today is crucial.