First Ever Hostile Takeover In Indian IT: L&T Expected To Increase Stake In Mindtree Despite Founders’ Resistance

Larsen & Toubro (L&T) limited is expected to initiate a hostile takeover of mid-tier IT services company MindTree today (18 March 2019) evening by buying out the stake of Mindtree's largest shareholder V G Siddhartha and then increasing its shareholding through an open offer to public shareholders, reports Times Of India (TOI).

This will be the first ever hostile takeover in India’s IT industry. Apart from Siddhartha, the four remaining founders of the Bengaluru-based MindTree - Krishnakumar Natarajan, Subroto Bagchi, N S Parthasarathy and current CEO Rostow Ravanan - together own 13.3 per cent of the company and they are reported to have been resisting the L&T bid.

L&T will purchase the 20.4 per cent stake held by V.G. Siddhartha and his two affiliate CCD firms that hold stake in Mindtree at a price of Rs 981 per share. This deal will value the IT services company at Rs 16,250 crore. Siddhartha is also the owner of India’s largest cafe chain Café Coffee Day (CCD).

After L&T purchases Siddhartha’s stake, the company is expected to announce a public offer to buy more shares using Securities and Exchange Board of India’s (SEBI) rarely-used section 3, clause 1 of the takeover code.

L&T Is The Highest Bidder

It is not clear if the current management team of MindTree will be able to fend off L&T's takeover bid. To do so, they will have to find an investor who will offer a higher price than L&T and at the moment, no such investor has appeared on the scene."So the promoters do not have any option but to leave it to shareholders to decide on change of control," said an executive to Mint.

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