View: War over Mindtree! Good for all shareholders

A M Naik, the Chairman of Larsen and Toubro, is sanguine following the company’s take-over bid for Mindtree, a mid-tier IT services firm. He told this newspaper that it was in the interest of employees to really get going with L&T and it is a really very positive move by L&T to take them.

The deal fulfils L&T’s long-cherished ambition for such an acquisition after its high profile, but unsuccessful attempt to acquire former scam-tainted Satyam Computers, once India’s fourth largest software company, a decade ago.

It had lost the race to Tech Mahindra that bid the highest at Rs 58 per share. L&T’s bid was lower at Rs 45.90 per share. “We did not have the flexibility due to the high price of our Satyam stock. That (the high price) went against us. Our bid of Rs 45.90 was the combination of various factors and the earlier acquisition price also had a major role (in determining the bid price), A M Naik had said. It was a straight bidding process.


Fast forward to 2019. L&T has mounted a hostile take-over bid, attempting to buy a 67% stake in the IT company for about Rs 10,733 crore. It has inked a deal to pay Rs 980 per share to buy 20.32% stake in Mindtree from an early investor V G Siddhartha, giving him a handsome exit. Additionally, L&T will make an open offer to raise its stake to 66.32%. Share prices of Mindtree have moved up, signalling the public good integral to hostile take-overs.

“We have an IT company, we have a technology service company. It is a natural addition to make the companies fairly sizable”, said A M Naik.

Typically, the acquirer sees the inherent strengths in the target company that make it a valuable buy. A counter-offer, if any, or a buy back proposal would have to be at a higher price.

While the outcome of the on-going tussle between L&T and the promoters of Mindtree is not known, the overall impact will be positive for all shareholders.

(The opinions expressed in this column are that of the writer)