L&T to make 1st-ever hostile bid in Indian IT for Mindtree

L&T to make 1st-ever hostile bid in Indian IT for Mindtree
  • 1

Bengaluru, Mar 18: Diversified conglomerate Larsen & Toubro (L&T) is set to launch a hostile bid to acquire mid-tier IT services company Mindtree, possibly as early as Monday evening. It will buy out Coffee Day founder and Mindtree’s largest shareholder, V G Siddhartha, and proceed with an open offer to public shareholders, spending as much as Rs 7,000 crore (or $1 billion), for a controlling interest, people directly aware of the matter have told TOI .
This will be the first-ever hostile takeover move in India’s technology industry, and a rare, full-blown tussle for a publicly-traded company in recent history. The four remaining founders of the two-decade-old, Bengaluru-headquartered Mindtree – Krishnakumar Natarajan, Subroto Bagchi, N S Parthasarathy and current CEO Rostow Ravanan – together own 13.3% of Mindtree and are resisting the L&T bid.
It was reported that Siddhartha’s exit could trigger M&A jitters for Mindtree in its December 17 edition. India Inc has seen very few successful hostile takeovers – among the notable exceptions are N Srinivasan-led India Cements’ acquisition of Raasi Cement in 1998 and the late Manu Chhabria’s ouster of the incumbent management to take control of Shaw Wallace in the late 1980s.
The A M Naik-helmed L&T is buying Siddhartha’s nearly 21% stake for over Rs 3,000 crore, at Rs 981 a share, which will make it Mindtree’s largest shareholder. Following this, L&T will trigger an open offer for another 26% from public shareholders. KPMG Corporate Finance is the lead transaction adviser, while Citigroup and Axis Capital will manage the open offer process.
The founders have spoken to multiple private equity investors — KKR, Baring Asia and ChrysCapital, among others — in the past two months to stitch up a counter-bid. But these talks have floundered for at least three reasons: the unwillingness of the founders to share much control; most private equity investors couldn’t match what L&T was offering; and the prospect of waging an expensive takeover battle against the almost Rs 120,000 crore-turnover conglomerate.
L&T declined to respond when contacted, while Siddhartha could not be reached for immediate comment.
L&T has eyed Mindtree for some time as it scouted for M&As in a consolidating sector. The nearly $1-billion revenue and fast-growing digital revenue — signalling strong adoption of newer technologies like AI, cloud, big data and analytics by clients — makes Mindtree a particularly attractive target.
Siddhartha, the earliest investor to back the founders, first talked about exit plans around 10 months ago, soon after he left the company’s board. He explored various options and even sought the support of founders to monetise the holding.