Larsen & Toubro may consider itself inching closer to acquiring a controlling stake in Mindtree with the IT services company deciding against a buyback offer to counter the open offer announced by the Mumbai-based conglomerate. Mindtree has instead constituted a Committee of Independent Directors who will now provide their reasoned recommendation on the unsolicited offer by L&T.
This comes even as L&T, on Tuesday, announced that the open offer to buy 31 per cent shares in Mindtree is scheduled to start on May 14 and close on May 27. The company has priced the offer at ₹980 a share. L&T will file the draft for the open offer with SEBI by April 2, and subsequently, the last day of public announcement of any competing offer would be April 16. That means if Mindtree decides to make a counter offer, it has to be done within three weeks. But the options seem to be running out for Mindtree.
“I think the options available to Mindtree would be limited. Perhaps the only thing left that they might want to do is engineer a public interest litigation (PIL). This could buy some time. The end result is more or less determined, it is only a question of valuation...trying to monetise and get more value. For that, there will be some level of renegotiation and frustration,” said Rajesh Begur, Founder & Managing Partner, ARA LAW.
Deal with Siddartha
L&T has already done a deal with VG Siddhartha, Founder of Cafe Coffee Day, to acquire his 20.3-per cent stake in Mindtree. Top executives at L&T have invited the Mindtree founders to convince them of the deal.
CEO Rostow Ravanan, as well as other founders, had recently said that the L&T offer was way below the historical high of ₹1,181/share. “Even with all the other objections we have, it is not a value accretive deal in any sense, and in fact, is value destructive for the shareholders of both the companies,” Ravanan had said in a recent interaction.
“My sense is that the committee will seek a premium on the existing price offered through the open offer,” said Kris Lakshmikanth, CEO, Headhunters India. Mindtree shares closed at ₹950 on Tuesday, marginally up from the previous day’s close.
The Mindtree board is learnt to have had discussions on Tuesday around pricing and may consider bringing in a new board member who could act as an arbitrator, according to a source close to the development.
The board which had indicated a possibility of a buyback, according to sources, took it off the table as SEBI rules mandate that after the public announcement of an open offer, the board of the target company shall not implement any buyback or make any change to the capital structure, unless the approval of shareholders is sought through a special resolution.
‘Good for clients’
“I think deal will be good for shareholders and clients. Shareholders are getting good premium. Clients will be assured that financially sound L&T group is behind it. For employees, the culture will be different but it can be worked out like it was worked out in Tech Mahindra-Satyam deal 10 years back. Today, Tech Mahindra is much better than what individually Satyam and Tech Mahindra were for employees shareholders and clients,” Pareekh Jain, founder of Pareekh Consulting, said.
Ball is now in the court of Mindtree’s Independent Directors who are members of the newly-formed committee. Apurva Purohit, Lead Independent Director, has been made the Chairperson of the Independent Directors’ Committee (IDC).
Purohit said that moving forward, the Committee will deliberate on the open offer using the advice of an independent legal counsel and financial advisors, who will be appointed shortly to assist the IDC. “The matter is currently under evaluation and no opinion has been formed by the Independent Directors thus far. Any reports suggesting otherwise are incorrect and baseless. The written reasoned recommendations on the open offer shall be provided within the timeline and as per the guidelines laid down by SEBI,” she added.
What’s on offer
* L&T has made open offer to buy 31% in Mindtree
* It is scheduled to start on May 14 and close on May 27
* The company has priced the offer at ₹980 a share
* Will file draft letter of the open offer with SEBI by April 2
* The last day of public announcement of any competing offer would be April 16