Frontal Attack

Mindtree is fighting L&T's takeover with tooth, nail and imploring letters, but it will need a white knight soon

The battle lines have been clearly drawn in what is probably the first hostile takeover in the Indian IT industry. On March 18, Larsen &Toubro (L&T) bought a 20.32% stake in Mindtree from Café Coffee Day founder VG Siddhartha for Rs.32.69 billion at Rs.980 per share, despite the promoters of the mid-tier IT services firm raising objection.

That’s not all, L&T is now looking to buy another 15% stake from the open market and has made an open offer for an additional 31% that would take its overall stake in Mindtree to 66%. It has earmarked Rs.107 billion for all three stages of the acquisition planned, valuing Mindtree at about Rs.162 billion.

This is L&T’s second attempt to acquire an IT services firm. It made an unsuccessful attempt to acquire the scam-tainted Satyam Computers in 2009 eventually losing that round to Tech Mahindra. However, this one looks like it is going to a protracted battle with the Mindtree founders resisting the transaction from the get-go. “The hostile takeover bid of Mindtree by L&T is a grave threat to the unique organisation we have collectively built over 20 years. We do not see any strategic advantage in the transaction and strongly believe that the transaction will be value destructive for all shareholders,” said Krishnakumar Natarajan, executive chairman, Mindtree, in a press conference held on Tuesday. In an emotional appeal to L&T, the founders asked the firm, "If companies like you behave with extreme hostility to first generation entrepreneurs what message are you giving to all start-ups in the country.”

But for L&T, the deal seems anything but hostile. Its top management maintains they see the deal to be value accretive not only for its own shareholders but also Mindtree’s, given their limited client overlap and complementary capabilities in digital, cloud and infrastructure management services. “We a


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