BENGALURU: With Larsen & Toubro (L&T) in the final stages of acquiring a 20.4 per cent stake in IT firm Mindtree from Cafe Coffee Day founder VG Siddhartha, the company is all set to witness a boardroom battle for control. Reports note that once L&T completes the acquisition of Siddhartha’s shares, it may look at acquiring a controlling stake in Mindtree through an open offer. L&T already has two publicly listed IT firms under its umbrella — Larsen and Toubro Infotech (LTI) and L&T Technology Services (LTTS). L&T might be looking to merge Mindtree, if it succeeds in acquiring the firm with LTI.
Meanwhile, Mindtree’s promoters and co-founders have scrambled to stave off the hostile takeover. The four remaining founders — Subroto Bagchi, N S Parthasarathy, Krishnakumar Natarajan, and Rostow Ravanan — own about 13.3 per cent stake in the company. Mindtree was co-founded by a team of nine members who left Wipro. Siddhartha, who left the board of Mindtree, last year was trying to monetise his holdings in the firm to reduce CCD’s debt.
On Sunday, Bagchi quit his job as the head of Odisha’s Skill Development Authority to return to Bengaluru, saying the “imminent threat of a hostile takeover... has made me resign from the government to able to go, save the company. I must protect the tree from people who have arrived with bulldozers and chainsaws so that in its place, they can build a shopping mall.” However, experts note that there is nothing wrong in a takeover since it is permitted by law and there is no need for any boardroom battle for control.
“L&T is buying the stake from Sidhartha for a premium and if they pay that amount they might look for a controlling stake. If L&T acquires majority stake by a way which is permitted by the law there is no question of governance,” said Shriram Subramanian of independent corporate governance and advisory firm Ingovern.
Mindtree, however, is using the tools it has under its disposal to block such a move, proposing a buyback on Friday in what is seen as an effort to counter L&T’s expected open offer. Mindtree employees have also begun protesting against a takeover on social media, saying that Mindtree’s unique culture will be ruined by a takeover. Amidst the buzz, Mindtree shares closed Monday at `962.50 up 1.74 per cent and LTI fell by 3.33 per cent at `1,573.30.
MAKING AN OFFER
Larsen & Toubro is in the final stages of acquiring a 20.4 per cent stake in IT firm Mindtree from Cafe
Coffee Day founder VG Siddhartha L&T on Monday made an offer to buy 31 per cent stake in IT
Services company Mindtree for J980 per share aggregating toJ5,030 crore
The four remaining founders of Mindtree own about 13.3 per cent stake in the company