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.<doc-sep>Larsen & Toubro – Mindtree deal: If the share purchase agreement (SPA) and the open offer goes through, L&T’s stake in Mindtree will stand at 66.32%, giving it the controlling stake in the firm. Larsen & Toubro – Mindtree deal: If the share purchase agreement (SPA) and the open offer goes through, L&T’s stake in Mindtree will stand at 66.32%, giving it the controlling stake in the firm. Heavy engineering major Larsen & Toubro (L&T) Monday said that it has entered into a definitive share purchase agreement (SPA) with V G Siddhartha and his related entities – Coffee Day Trading and Coffee Day Enterprises – to acquire a 20.32 per cent stake in Mindtree at Rs 980 per share, aggregating to approximately Rs 3,269 crore. In a late evening filing to stock exchanges, L&T said, “Immediately following the filing of the public announcement, L&T has placed an order with its broker for on-market purchase of up to 15 per cent of share capital of Mindtree at a price not exceeding Rs 980 per share.” It further said, “Pursuant to execution of the share purchase agreement, aforementioned market order for share purchase and with the intent to acquire majority stake in Mindtree, L&T has announced an open offer as per the Sebi’s takeover regulations to the public shareholder of Mindtree to purchase up to an additional 31 per cent of the outstanding shares of Mindtree at a price of Rs 980 per share in cash.” If the SPA and the open offer goes through, L&T’s stake in Mindtree will stand at 66.32 per cent, giving it the controlling stake in the company. In a separate filing, Mindtree also said it has received L&T’s proposal for an open offer representing 31 per cent of the voting share capital. L&T further informed the exchanges that Mindtree would remain an independent listed entity, and L&T would extend support to Mindtree in its business going forward. “Mindtree will benefit from access to larger client base and wider product offering under a common parentage giving higher returns to shareholders of Mindtree,” the L&T filing said. The price of Rs 980 a piece will be about a 2 per cent premium to Mindtree’s Monday’s closing share price of Rs 962.50 on the BSE. The share price closed up 1.74 per cent on Monday. Mindtree is a technology consulting and services company that began in 1999. Currently, it has a market capitalisation of Rs 15,806 crore. During FY18, Mindtree’s net profit stood at Rs 570 crore up 37 per cent over a year ago, while the revenues at Rs 5,463 crore, were up 4.33 per cent versus FY17. The company’s Ebitda (earnings before interest, tax, depreciation and amortisation) was up 3.34 per cent at Rs 741 crore in FY18. Last Friday, Mindtree informed exchanges that its board will meet on March 20 to consider the proposal of a buyback of shares of the company. The move was seen as an attempt by the management to prevent any hostile takeover bid of the company. Later on Saturday, Krishnakumar Natarajan, chairman and co-founder, Mindtree had reportedly written to the L&T board against ‘hostile takeover’ of Mindtree and said that it had alarmed stakeholders, institutional investors, customers and even employees. Natarajan also argued that several large IT services providers had failed to integrate acquisitions and said a merger between Mindtree and L&T Infotech would be value destructive for all. Later, on Sunday, Mindtree co-founder and board member Subroto Bagchi said he had quit as chairman of the Odisha Skill Development Agency to help Mindtree steer through the current takeover crises. Bagchi tweeted, “An imminent threat of hostile takeover of Mindtree has made me to resign from the Government to be able to go, save the company. I must protect the tree from people who have arrived with bulldozers and saw chains to cut it down so that in its place, they can build a shopping mall.” He also said that, Mindtree has not been designed as an “asset” to be bought and sold. It is a national resource. It has a unique culture that humanises the idea of business. It sets the standards of corporate governance. I need to be there in its time of difficulty. Hence the hard decision to return. L&T Technology Services, part of the L&T Group, is a listed entity and has expertise in engineering design, product development, smart manufacturing and digitalisation. It has a market capitalisation of Rs 15,504 crore, according to the BSE as on Monday. L&T Infotech is a technology consulting and digital solutions company that claims to have operations in 30 countries, according to its website. It was founded in 1997 as a subsidiary of L&T. The firm has a market capitalisation of Rs 27,289 crore, as per BSE on Monday. —FE<doc-sep>The Bengaluru-based IT services company Mindtree Ltd fell in early trade on Tuesday after conglomerate Larsen & Toubro Ltd (L&T) said it would buy a 20.32 per cent stake in Mindtree for Rs 10,730 crore, including open offer. L&T will buy the stake from Cafe Coffee Day founder V.G. Siddhartha and companies related to him, Coffee Day Enterprises and Coffee Day Trading, L&T said late on Monday. Mumbai-based L&T also placed an order with its broker for an on-market purchase of up to 15 per cent of Mindtree's shares at Rs 980 per share. It is also looking to buy an additional 31 per cent from Mindtree's public shareholders at the same price. The Mindtree acquisition transaction will be fully funded by the Larsen & Toubro and the company will remain independent listed entity post acquisition. L&T stock was trading 1.6 per cent lower on the BSE at Rs 1,357 as of 10:36 am. (With agency inputs)<doc-sep>L&T's hostile takeover bid of Mindtree, explained While L&T maintains that this isnâ€™t a hostile takeover and that Mindtree will be run as an independent company, Mindtree promoters strongly oppose the takeover bid. Money M&A Indian multinational conglomerate Larsen and Toubro is set to acquire IT major Mindtree through a hostile takeover bid. On Monday, it entered into a share purchase agreement with Cafe Coffee Day founder VG Siddhartha to buy 20.3% stake in Mindtree from him and his two affiliate firms. L&T will purchase this stake at a price of Rs 980 per share, which will approximately amount to Rs 32.69 billion. The total deal will cost L&T roughly Rs 10,733 crore. Currently it has cash reserves of Rs 15,000 crore. With the promoters of Mindtree -- Krishnakumar Natarajan, Subroto Bagchi, NS Parthasarathy and Rostow Ravanan â€“ vehemently opposing the takeover, this makes it one of the largest hostile takeovers India Inc. has seen. Hereâ€™s an explainer on what the takeover is all about: What is a hostile takeover? By definition, a hostile takeover is one where one company (acquirer) acquires another company (target) either by directly going to the targetâ€™s shareholders of by fighting to replace the management in order to get the acquisition approved. And when the target companyâ€™s management doesnâ€™t want the deal to go through, it becomes a hostile takeover. In this case, Mindtreeâ€™s promoters have unconditionally opposed the takeover bid by L&T and say that it is value destruction for all shareholders. What exactly is L&T doing? Usually, when a corporation is trying to acquire another, it makes an offer to gain control if it owns 25% of the organisation it is trying to acquire. However, L&T would be exploiting a loophole in the Takeover Code of the Securities and Exchange Board of India. Using section 3, clause 1 of the takeover code, along with section 4 of the code, L&T is entitled to announce an open offer to acquire control of Mindtree. As per this, those with 25% stake or more cannot take over a company unless they make an open offer to acquire the shares, and make a public announcement. However, the code also states whether or not one holds shares or voting rights, one cannot take control of the company unless a public announcement of an open offer to acquire those shares is made. What this means is that using both these sections allows L&T to make an open offer, without having to own 25% shares in Mindtree. With this takeover, L&T reportedly aims to acquire Mindtree. It has bought 20.3% stake from Siddhartha and has placed an order with its broker for on-market purchase of up to 15% of share capital. Apart from this, L&T has announced an open offer as per SEBI Takeover Regulations (as required under Regulation 3(1) and 4) to the public shareholders of Mindtree to purchase up to an additional 31% of the outstanding shares of Mindtree at a price of Rs 980 per share in cash. If this goes through, L&T will hold nearly 66% stake in Mindtree. The three promoters together currently own 13.3% in Mindtee. Why does L&T want to acquire Mindtree? The Chairman of L&T Group, AM Naik says that the acquisition of Mindtree fits into the larger plan of the company. According to L&T, it started with Siddhartha approaching them to sell his stake in the company. While it initially had a neutral view towards this, L&T now sees enormous value in taking over Mindtree. L&T MD and CEO Subrahmanyan has maintained that Mindtree will remain independent and that L&T will provide board oversight. L&T already has a listed IT company L&T Infotech, and believes Mindtree will complement the business. While L&T Infotech is predominantly into banking, Mindtree focuses on areas such as retail and hospitality. Addressing the media on Tuesday, Subrahmanyan said that the logic behind acquiring Mindtree is to expand its services business and not to integrate it with L&T Infotech. The objective, he said, is to increase shareholder value. What is VG Siddharthaâ€™s role and why does he want to sell his stake? CafĂ© Coffee Day founder VG Siddhartha held 20.4% stake in Mindtree, making him the single largest shareholder in the company. This, he held along with two of his firms - Coffee Day Enterprises and Coffee Day Trading. Coffee Day Enterprises, as a company, has a total debt of around Rs 6,500 crore as of September, as per a Bloomberg Quint report. Siddhartha has been looking to sell his stake in Mindtree to pare CCDâ€™s debt and at current market prices, Siddharthaâ€™s stake in the company through his companies is worth roughly Rs 3,100 crore. Now, most of these shares have been pledged with banks including Standard Chartered, Edelweiss, Kotak Mahindra, Yes Bank, Axis, among others. However, according to an Economic Times report, Standard Chartered Bank has agreed to lend Rs 3,000 crore to Siddhartha to release his pledged Mindtree shares held with these banks and consolidate all of them under one entity. This, the report says, will make it easier for him and for L&T to transfer the shares. Why is Mindtree opposing the takeover and what is its strategy? Over the past week, the promoters did everything they could to save the company, but to no avail. Mindtree has called a board meeting on March 20 to consider a share buyback to prevent the possible takeover from L&T, as per its filings with the stock exchanges. The Companies Act states that a company can buyback a maximum of 10% of its capital. If they hold a general meeting and pass a special resolution, then they can buy up to 25%. A first measure of its kind to fend off a hostile takeover, the buyback could possibly reduce the number of shares available for purchase. According to Bloomberg, as of December 2018, Mindtree had cash worth Rs 162 crore and investments worth Rs 811 crore. If the board, in its meeting on Wednesday, agrees to the buyback plan, Mindtree can use this money for a buyback and potentially prevent L&Tâ€™s takeover bid. Mindtree founders fight back<doc-sep>
Mumbai (Maharashtra) [India], Mar 18 (ANI): Larsen & Toubro has entered into a definitive share purchase agreement (SPA) with coffee baron V G Siddhartha and his related entities to acquire 20.32 per cent stake in Mindtree, a global technology services and digital transformation company. The entities include Coffee Day Trading and Coffee Day Enterprises. L&T will purchase this stake at a price of Rs 980 per share aggregating to about Rs 3,269 crore. Immediately after the filing of public announcement late on Monday, L&T placed an order with its broker for on-market purchase of up to 15 per cent of share capital of Mindtree at a price not exceeding Rs 980 per share. After execution of the SPA, the market order for share purchase and with the intent to acquire majority stake in Mindtree, L&T has announced an open offer as per SEBI Takeover Regulations (as required under Regulation 3 (1) and (4) to the public shareholders of Mindtree to purchase up to an additional 31 per cent of the outstanding shares of Mindtree at a price of Rs 980 per share in cash. The acquisition is subject to inter alia receipt of necessary regulatory approvals and satisfaction of other conditions as specified in the offer documents. "L&T has sufficient financial flexibility to fund the entire transaction through its existing financial resources," the company informed stock exchanges in regulatory filings. "This acquisition is in line with L&T's stated strategy of focusing on services and asset-light businesses to drive profitable future growth," it said. This further adds to L&T's attractive IT services platform with a focus on new-age digital and cloud solutions, making it highly complementary to L&T's current technology services portfolio. Mindtree's offerings to its customers include application development and maintenance, infrastructure management services, independent testing, package implementation, consulting and IP products related solutions. While Mindtree will remain an independent listed entity, L&T will extend support to Mindtree in its business going forward. Mindtree will benefit from access to larger client base and wider product offerings under a common parentage giving higher returns to shareholders of Mindtree. "This acquisition is part of our strategy to deliver industry-leading IT services to our clients worldwide," said Managing Director and CEO S N Subrahmanyan. "It will help propel L&T's technology portfolio into top tier of Indian IT companies." Mindtree has a well-established management team which has earned the respect of the market in terms of its service offerings and business practices. "This acquisition will allow L&T to further enhance shareholder value for both its own shareholders and Mindtree shareholders in the medium to long term," said Subrahmanyan. (ANI)