Mindtree\'s independent directors must guide investors: IiAS

Mindtree's independent directors must guide investors: IiAS

Mindtree’s founders, who own about 13% of the company, have opposed L&T’s takeover bid, terming it hostile, and have said the two companies have different corporate cultures making a merger destructive to value.Jochelle Mendonca  |  ETtech  |  March 19, 2019, 10:52 IST
Mindtree's independent directors must guide investors: IiAS Mindtree’s independent directors must provide objective guidance to shareholders on whether engineering conglomerate L&T’s open offering for the mid-tier IT company is in its long-term interest, shareholder advisory firm IiAS said.

"Investors may not be in a position to understand all the nuances of the decision. Therefore, IiAS believes the Independent Directors of Mindtree must provide guidance to the company’s shareholders on whether shareholders should take up L&T’s open offer. It is not necessary that Mindtree’s Independent Directors tow the line with the company’s promoters: they may have a different view," the proxy said in a note.

It pointed out that in 2014, the independent directors of Essar Energy Plc had opposed the delisting offer made by the company’s promoters -- the Ruias.

Read: L&T buys 20.32% stake in Mindtree, eyes 46% more stake

Mindtree’s founders, who own about 13% of the company, have opposed L&T’s takeover bid, terming it hostile, and have said the two companies have different corporate cultures making a merger destructive to value.

“A hostile takeover by Larsen & Toubro, unprecedented in our industry, 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,” a statement by the founders said.

IiAS said that corporate culture is a ‘fundamental basis’ for corporate governance and it is valid to consider the impact of a change in control.

“Having said that, a change in corporate culture may not necessarily be detrimental to employees or the company’s growth prospects. At the same time, a services business is essentially driven by its people. If Mindtree’s leadership and key employees leave (taking some clients with them) following the takeover, it could have damaging consequences for the business,” the advisory said, highlighting the independent directors role need to play in the transition. "None are better placed to take a dispassionate call than the independent directors, who should know the company best."

Read: L&T's pursuit for scale drives its Mindtree ambition