After much debate, L&T has gone ahead with a hostile takeover of IT major Mindtree. One of India’s largest engineering, technology and construction conglomerate Larsen & Toubro has entered into a definitive Share Purchase Agreement (SPA) with V G Siddhartha and his entities Coffee Day Trading Limited and Coffee Day Enterprises Limited, to acquire 20.32% stake in global technology services major Mindtree. L&T will purchase this stake at a price of Rs 980 per share, which will approximately amount to Rs 32.69 billion.
Post this announcement, L&T has placed an order with its broker for on-market purchase of up to 15% of share capital of Mindtree at a price not exceeding Rs 980 per share. 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.
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 said in a statement that it has sufficient financial flexibility to fund the entire transaction through its existing financial resources.
While Mindtree would remain an independent listed entity, L&T would extend support to Mindtree in its business going forward. L&T claims that Mindtree will benefit from access to larger client base and wider product offerings under a common parentage giving higher returns to shareholders of Mindtree.
L&T says that this acquisition is in line with L&T’s strategy of focusing on services and asset light businesses to drive profitable future growth. Mindtree’s offerings to its customers include application development & maintenance, infrastructure management services, independent testing, package implementation, consulting and IP products related solutions. This, L&T says, will complement its current technology services portfolio.
“This acquisition is part of our strategy to deliver industry leading IT services to our clients worldwide. 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,” S N Subrahmanyan, CEO & Managing Director said in a statement.
KPMG Corporate Finance is the lead advisor for the transaction. Axis Capital Limited - lead financial advisor and Citigroup Global Markets are acting as financial advisors to L&T. AZB & Partners and Baker & McKenzie LLP are acting as legal advisors to L&T.