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It is a bit unfortunate that Larsen & Toubro Ltd’s bid for a

relatively well-run company like Mindtree Ltd, a software firm

that has rewarded its shareholders well over the past 10 years,
has come to revive lost interest in the business of hostile takeovers
in India.

Engineering and construction conglomerate Larsen and Toubro Ltd (L&T) has
initiated talks to acquire a stake in Mindtree Ltd, joining two private equity (PE)
firms and Japan’s NEC Ltd which have also shown interest in the software services
L&T is discussing with Café Coffee Day (CCD) founder V.G. Siddhartha the
possibility of buying the 20.4% stake held by Siddhartha and two CCD affiliate
firms in Mindtree, said two people with direct knowledge of the matter.
The talks are also focused on L&T’s plan to buy an additional 5% stake either
through an open offer or directly from the promoters of Mindtree, the people said,
requesting anonymity.
After acquiring a controlling stake in Mindtree, L&T will most likely
merge the company with Mindtree’s current and larger rivals L&T
Infotech and L&T Engineering to create a company large enough to
compete with Infosys, TCS, Wipro and HCL, the person said.

Mindtree’s promoters hold a total of 13.32%, with chairman

Krishnakumar Natarajan holding 3.72%, co-founder Subroto Bagchi
holding 3.1%, N.S. Parthasarathy holding 1.43% and the CEO
Rostow Ravanan holding 0.71%. V.G. Siddhartha holds 20.4% stake in
mindtree. Baburaj Pillai has direct oversight over 2.4% of Mindtree’s
stock. Ditto for two other large investors—Pulak Prasad-run Nalanda
Capital, which holds 10.61% , and Akash Prakash-led Amansa
Holdings, which owns 2.77%. It adds upto ie Direct investors owns

L&T has two options. L&T can just buy Siddhartha and his two firms’
stake and wait for the promoters to agree to sell their stake to L&T at
a later stage to enable the latter to make an open offer for gaining
control. Or, L&T can buy the 20.4% holding from Siddhartha and if
the promoters continue to be reluctant, L&T can buy more shares of
Mindtree from the public in the open market whenever the shares
correct and increase their holding beyond 25% to get the open offer
triggered so that L&T is able to buy at least 26% more to be able to
force a takeover of Mindtree," said the second person.

Why CCD founder Siddhartha wants

to sell his Mindtree stake
 Urgency to exit may be linked  to  the ₹300  crore he owes IT dept
 Rising debt at Sivan may also be a factor
A 26% shareholding gives L&T the ability to block special
resolutions and triggers a mandatory open offer.
With that objective, L&T will also make open market purchases of up
to 15% of Mindtree’s share capital. Once they reach 26%
shareholding, L&T will make an open offer, triggered by the Sebi
takeover code, to acquire another 31% shareholding at₹980 a share.
At this share price, the cost of the hostile takeover is ₹10,733 crore.
The acquisition will be fully funded from L&T’s internal resources.
“Mindtree will be run as an independent company and will be given
headroom to reach its full potential, while L&T will provide board
oversight and they can benefit from L&T connects

A culture shock awaits Mindtree

employees under L&T
 Mindtree has an informal work culture: many of its employees call
members of the founding team by their first names
 In contrast, Larsen and Toubro's (L&T) work culture is based on
command-and-control and top-down management

On 18 March, L&T announced its plan to launch an open offer to buy

an additional 31% in Mindtree after agreeing to purchase Café Coffee
Day founder V.G. Siddhartha’s 20.32% stake in the firm for ₹3,269
crore. L&T also said it would buy 15% stake in Mindtree separately
from the open market.
Infratsructure major Larsen & Toubro has purchased around 20%
stake of V.G. Siddhartha and Coffee Dayin Mindtree through block
deal for about ₹3,210 crore.
According to data available at the BSE, L&T bought 3.27 crore shares
held by Siddhartha and Coffee Day Trading Limited on Tuesday.
The infrastructure major is in fray to buy up to 66% stake in the
Mindtree for around ₹10,800 crore.
L&T has entered into a deal to buy Cafe Coffee Day owner
Siddhartha's 20.32% stake in Mindtree and has also placed an order
with brokers to pick up another 15% of the company shares from the
open market for about ₹2,500 crore.
Subsequent to these deals, L&T has made an open offer to buy
additional 31% stake through an open offer.

 The transaction, if completed, will see L&T buy up to 66.32% in

Mindtree at ₹980 per share, making the three-part deal the first
hostile takeover in the Indian IT industry.

 NEW DELHI: Infrastructure major Larsen & Toubro on

Monday bought shares worth about ₹113 crore of Mindtree
through open market transactions.
 According to the bulk deal data available with the NSE, L&T
bought over 11.52 lakh shares, or 0.75%, worth ₹112.91 crore
with the average price being ₹979.94 per scrip.
 New Delhi: Larsen and Toubro Ltd (L&T) gained a controlling
interest in Mindtree Ltd, raising its stake to 60% in the
Bengaluru-based company on Wednesday and successfully
concluding India’s first hostile takeover of a software developer.
 L&T completed buying the 31% additional stake it targeted to
acquire in Mindtree for ₹4,988.82 crore through an open offer as
large investors rushed to sell their holdings. The offer to
purchase 50.9 million shares of Mindtree from public
shareholders was subscribed 1.2 times on Wednesday, two
people with direct knowledge said condition of anonymity.
NEW DELHI: IT firm Mindtree on Wednesday said Larsen and
Toubro (L&T) has "acquired control" of the company with a 60.06%
stake and has been categorised as promoter.
It is not that investors weren’t prepared. The Mindtree stock has lost
about 16% in the last two weeks after the resignation of top
management personnel after the takeover by L&T. Rising employee
churn amid management change can slow down business momentum,
warned an analyst at a brokerage firm. This is especially true of
Mindtree, which is highly dependent on discretionary spends and
requires greater customer engagement. Note that employee attrition
rate crossed 15% on a trailing 12-month basis.
The need of the hour is for L&T to move quickly to limit the damage.
Apart from containing attrition, it needs to simultaneously decide on
Mindtree’s future. As of now L&T maintains that it plans to run
Mindtree independently, rather than merge it with its IT services
subsidiary. However, as analysts pointed out, there is limited merit in
keeping the two IT companies separate. Combining them will bring
economies of scale and better management focus.