Indian engineering firm Larsen & Toubro is set to buy 20.32 percent equity stake in IT services company Mindtree.
Larsen & Toubro said it has entered into an agreement with VG Siddhartha and his related entities, Coffee Day Trading and Coffee Day Enterprises, to acquire 20.32 percent stake in Mindtree for Rs 980 per share, aggregating to approximately Rs 3,269 crore.
It has announced an open offer as per SEBI takeover regulations to the public shareholders of Mindtree to purchase up to an additional 31 percent of the outstanding shares of Mindtree at a price of Rs 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.
“This acquisition will propel L&T’s technology portfolio into the top tier of Indian IT companies,” said SN Subrahmanyan, L&T CEO and Managing Director.
Mindtree founders are looking to block L&T from buying stake in the IT services company. On March 15, the company’s board said it would meet on March 20 to consider the buyback option.
The company’s reserves are around Rs 2,800 crore. It means that it can allocate around Rs 280 crore for the buyback of the company’s shares and another Rs 700 crore to buy another 25 percent 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.
Krishnakumar Natarajan, executive chairman; Subroto Bagchi, co-founder; Rostow Ravanan, CEO; and Parthasarathy NS, executive vice chairman and COO; issued the following statement:
“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. We don’t see any strategic advantage in the transaction and strongly believe that the transaction will be value destructive for all shareholders.”
Mindtree reported 17.4 percent increase in revenue to $251.5 million and 22.2 percent growth in net profit to $26.9 million in the December 2018 quarter.
Mindtree had 340 active clients in the December 2018 quarter. Its headcount stood at 19,908 with trailing 12-month attrition at 13.4 percent. Mindtree said its digital business grew 32.4 percent.
Larsen & Toubro Infotech (LTI) reported 18.2 percent increase in revenue to $346.9 million in the December quarter of 2018.
