L&T unveils near Rs 11,000 crore unsolicited bid for Mindtree

MUMBAI: In an unsolicited takeover attempt that India Inc has not seen in recent times, the $18 billion diversified conglomerate Larsen & Toubro (L&T) has unveiled a Rs 10,669 crore bid for Mindtree as part of its strategy to “focus on services and assetlight businesses to drive profitable future growth”.

On Monday, the S N Subrahmanyan-led L&T signed an agreement to acquire Mindtree’s largest shareholder V G Siddhartha’s 20.32% for Rs 3,269 crore, or Rs 980 apiece. L&T has also placed an order with its broker for an additional 15% of Mindtree at the same price of Rs 980 apiece, signalling that it is in control of the transaction. Besides, it is making an open offer for a further 31%, in line with the takeover regulations.


If L&T’s move succeeds, it will acquire 66.32% of Mindtree for Rs 10,669 crore. In a statement, L&T said that it has sufficient financial flexibility to fund the entire transaction through its existing financial resources. After a successful acquisition, L&T intends to maintain Mindtree as an independent listed entity.

L&T’s statement added that Mindtree will benefit from access to a larger client base and wider product offerings under a common parentage, giving higher returns to shareholders of Mindtree.

However, the promoters of Mindtree, who together own 13.3%, are resisting the L&T bid. To fend off L&T, the promoters would need a white knight that would match the engineering major’s financial muscle. Interestingly, Siddhartha, who also owns the Cafe Coffee Day chain, has been a white knight for Mindtree for almost two decades.

If the Mindtree promoters decide to make a counter bid, they will have to offer a price higher than Rs 980. The Rs 980 price values Mindtree at Rs 16,088 crore. On Monday, the shares of Mindtree closed 1.7% higher at Rs 963 on the BSE. Mindtree’s management has already reached out to key non-promoter shareholders to fend off L&T’s takeover bid.

“The acquisition will help propel L&T’s technology portfolio into the top tier of Indian IT companies,” said Subrahmanyan. In the past, L&T had looked at several IT companies, including Satyam, Mphasis and Hexaware, but none of these translated into any successful M&A deals.

L&T’s announcement comes a couple of days ahead of the Mindtree board’s meeting scheduled for Wednesday, when it will consider a share buyback proposal. Rules allow a company to repurchase its own shares up to 10% of its reserves. But since L&T has already announced its acquisition move, rules now don’t allow Mindtree to use the 10% of its reserves for a share buyback programme.

The L&T-Mindtree deal, where KPMG Corporate Finance is lead transaction adviser, is subject to regulatory and other customary approvals. Interestingly, L&T itself has been a hostile takeover target in the past. And it has successfully managed to thwart overtures by the Ambanis and Birlas.