MUMBAI | BENGALURU: Independent directors at Mindtree have voiced their concerns about the board not having a “collective and informed stand” on what is seen as a hostile takeover attempt by L&T. The IT company’s board will discuss seeking a meeting with the engineering conglomerate, sources with knowledge of the matter said.
L&T last week signed a deal to buy 20.3% stake of Mindtree’s long-term investor Coffee Day Enterprises founder VG Siddhartha for Rs 3,269 crore. It also committed to spend as much as Rs 7,464 crore to get a controlling stake of 66.32% in Mindtree through a combination of open offer and buying shares from the market.
Mindtree’s founders termed the deal a ‘hostile’ takeover. On March 20, the Bengaluru-headquartered company’s board met to discuss a potential buyback, though no decision was taken. ET reported that some independent directors had asked the company to consider L&T’s offer and begin negotiations.
“The entire board has to be consulted by the founders about the hostile bid made by L&T. The directors have stressed on the need to consider the offer from all angles keeping in mind the organisation’s growth prospects,” a top Mindtree official close to the development said.
“It’s not a small deal, a Rs 10,000-crore plus offer is a big sum and any decision has to be well considered and thought out. So even we are surprised that L&T did not engage with the board formally. Also it’s the fiduciary duty to of an independent director to ensure that Mindtree’s stand is not emotional or sentimental and done with a focus on its future and growth prospects,” the
A second source with knowledge of the board discussion said the entire board wanted to be involved in the discussions, as the founders had made their opposition to the deal clear. “The independent directors are staking out their independence. All eyes are going to be on this deal and them because of the nature of the transaction,” the source added.
L&T’s pursuit of Mindtree is the first hostile takeover in the Indian IT space. Mindtree has said hostile takeovers make little sense in an industry whose main asset is talent and their client relationships.
“The culture of the two organisations are radically different and yet business imperatives mean nothing is cast in stone, it is felt. The board will discuss all pros and cons once again and possibly seek a fresh meeting on the issue with L&T,” another official said.
“We have complete support from our board because by every important measure, this proposed deal does not make much sense. We have carefully considered the offer, and have concluded that it would not be the best course for any of our stakeholders. Most experts agree with us that this takeover attempt will end in failure and be a disappointment to all involved, especially the shareholders. The board will be focused on how we maintain Mindtree as a fully independent company,” Krishnakumar Natarajan, chairman of Mindtree, and a founder, told ET in an emailed statement.
Source: Economic Times