‘Siddhartha made the first move... that convinced L&T to go for it’

The takeover battle between engineering conglomerate Larsen & Toubro (L&T) and IT services firm Mindtree got fierce on Tuesday with the promoters of Mindtree vowing to keep the two-decade-old company independent, while L&T tried to drive home the point that there was no animosity while wooing Mindtree.

As Mindtree promoters and management called L&T’s attempt to acquire it a hostile move, L&T Chief Executive Officer (CEO) SN Subrahmanyan said it’s a bid for dil and pyaar as the infrastructure group looks for the new alliance in a bid for a larger services play.

Subrahmanyan said VG Siddhartha, Founder of Cafe Coffee Day, and a 20.3-per cent stakeholder in Mindtree since its inception, approached the firm a few months back to sell his stake in Mindtree and saw L&T as the best fit.

“About six years back I am told the present management of Mindtree, founders, approached the management at that time at L&T and said ‘Can you buy our stake’. We did not show interest for two reasons, Siddhartha was not supportive at that time and second, I think we didn’t have the bandwidth to do it,” Subrahmanyan told BusinessLine in an interview.

“Today we are much different, we have also evolved and grown over the period of time. It was through a mutual friend that Siddhartha whom I knew long time back came and contacted me and said SNS, I have 21 per cent, would you like to take a look at it. We were neutral at that time because we had not thought about anything like that. But then he kept on persuading me and pursuing... at one points of time, when somebody comes three-four times... one started looking at it,” Subrahmanyan said.

L&T then met with Mindtree management a few times and tried to convince them about the acquisition but emotions got the better of them and they did not agree to the proposition, he said.

He said L&T will pursue the acquisition and ensure that it gets at least 26 per cent stake in Mindtree.

“Once you go into it, I can’t be an investor, we are not, we need to have some 26 per cent and over a period of time acquire more and our intention is to keep that company absolutely independent,” Subrahmanyan said.

L&T made a ₹10,733-crore bid on Monday with a three-pronged strategy that includes paying ₹980 a share for a 20.3 per cent stake with Siddhartha; buying 15 per cent from the public; and making an open offer at ₹980 a share post the approval of Siddhartha’s stake buy that could take 30-40 days. If the plan goes ahead, that’ll get L&T 67 per cent equity in Mindtree for ₹10,733 crore.

The promoter group holds a 13.3 per cent stake in Mindtree, leaving them with little option to counter the L&T offer. They’ve already lost the opportunity to buy out Siddhartha’s stakes.

L&T is among the top players in most of the sectors that it’s present in, with the exception of IT services where it is not even among the top five. The company hopes that the acquisition will allow it to move up the ladder and get access to larger deals, which are currently dominated by a select few.

‘May lose clients’

Meanwhile, Mindtree’s co-founders went on the offensive, saying that if L&T proceeds with its hostile bid, clients and employees will walk away without any hesitation.

“A hostile takeover by Larsen and Toubro, unprecedented in our industry, could undo all of the progress we’ve made and immensely set our organisation back,” the promoters of MindTree said in a statement which was read out at a press conference jointly addressed by co-founders Krishnakumar Natarajan, Subroto Bagchi and Rostow Ravanan.

The co-founders also seemed upset at Siddhartha selling his stake. Expressing surprise at the decision, CEO Ravanan said, “A shareholder cannot put a company at risk.”

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