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What message is L&T giving start-ups: Mindtree

What message is L&T giving start-ups: Mindtree

Bengaluru: Strongly opposing L&T's hostile bid, Mindtree promoters Tuesday asked why the infrastructure giant could not build a great technology business on its own and wondered what kind of a message is being sent to start-ups and credible entrepreneurs with the takeover attempt.

Posing five questions to diversified Larsen and Toubro (L&T), which already has two separate IT firms, the promoters also wanted to know what would happen if Mindtree employees choose to leave after the takeover.

"You are a company with a turnover of Rs 1,20,000 crore, you are 18 times the size of Mindtree. Why can't you build a great technology business with your resources and capability without disseminating another organisation," Mindtree promoter and Executive Chairman Krishnakumar Natarajan said in a press conference here.

Mindtree promoters have staunchly opposed the L&T's bid to acquire the company, describing it as a grave threat and value destructive to shareholders.

Other promoters are Subroto Bagchi (co-founder), Rostow Ravanan (CEO) and Parthasarathy N S (executive vice-chairman and COO). All the four are also co-founders of Mindtree.

"This is a people business. 'Mindtree Minds' have signed up for a mission not just a salary. Take their mission away and they will go... what will you be left with," Natarajan said.

In the country's first hostile takeover bid in the IT sector, L&T made an offer Monday to buy up to 66 per cent stake in Mindtree for around Rs 10,800 crore.

Natarajan also questioned L&T on what message it is giving to start-ups in the country and to honest and credible entrepreneurs.

L&T has entered into a deal to buy Cafe Coffee Day owner V G Siddhartha's 20.32 per cent stake in Mindtree and has also placed an order with brokers to pick up another 15 per cent of the company shares from the open market.

Subsequent to these deals, L&T would make an open offer to buy additional 31 per cent stake through an open offer, it said in a late evening statement on Tuesday.

All the three acquisitions are being done at Rs 980 per share, a premium of 1.8 per cent over Monday's closing price of Mindtree on the BSE. Mindtree closed on the BSE at Rs 962.50 a piece. L&T would pay Siddhartha Rs 3,269 crore and Rs 5,030 crore for the open offer, according to filings made by L&T and Mindtree.

The company would shell out around Rs 2,500 crore for acquiring the additional 15 per cent stake. Together, the outgo would be around Rs 10,800 crore, according to a rough calculation. Natarajan said L&T has decided to mount first-ever hostile in the 50-year-old unblemished Indian IT industry.

"If you persist in whatever you are doing, you will be forever be remembered for this. Is this how you want to set an example?" he said.

He added that customers of Mindtree have selected it for its unique culture and warned that clients would "stall all future business and even take their business elsewhere".

"In the process, you would have demolished shareholders value for both the companies. Is this the right thing to do?" Natarajan said. The board of directors of Mindtree is scheduled to meet Wednesday to consider a proposal for buyback shares.

Facing heat, L&T claims deal done by Siddhartha

Mumbai: Under flak for mounting a Rs 10,733-crore hostile takeover bid on Mindtree, engineering major L&T Tuesday said the deal got triggered after largest sharehlder VG Siddhartha approached them three months ago, and exuded confidence in winning over the unhappy promoters.

L&T managing director and chief executive SN Subrahmanyan invoked parallels with Bollywood dramas, saying with 'dil and pyaar' (heart and love) it will be able to win over everybody.

He made it clear that L&T, which is looking at the Mindtree deal as an investment to deploy its cash of over Rs 15,000 crore, will want at least 26 percent stake in the target company.

L&T had Monday night announced that it reached an agreement to acquire Siddhartha's 20.32 percent stake at Rs 980 a share (valuing his stake in Mindtree at Rs 3,269 crore) and also announced its intention to raise the ownership to 67 percent by buying an additional 31 percent through an open offer (at the same price of Rs 980 a share which is 1.81 percent premium over Monday closing price) and another 15 percent off the market.

Together the deal will cost the engineering major which is sitting on a cash pile of Rs 15,000 crore, Rs 10,733 crore-of which Rs 3,269 crore will go to Siddhartha and his related parties Caf Coffee Day and Rs 2,434 crore for the 15 percent buyout from market and Rs 5,030 crore for open offer.

The promoters of Mindtree led by Krishnakumar Natarajan, Subroto Bagchi, and Parthasarathy NS among others, responded calling the plan as a grave threat and a value- destructive. The company is also separately mulling a buyback to stave off L&T's bid. Its over 20,000 employees are also unhappy with the deal, according to reports.

There are also that some of the mutual fund houses are also not happy with the deal as open offer premium is only a paltry 1.81 percent and that if L&T sweetens the deal, they may go with it.

Acknowledging the concerns, Subrahmanyan said "emotions have to be overcome as we go forward. The senior people in the management are (our) personal friends, good people, men of repute and who have done their best to get Mindtree to where it is today. We feel lot of positivity and sync in the way to go forward."

Refusing to specifically answer a question on whether the deal is strategic or financial, Subrahmanyan said Mindtree will maintain its separate identity for "some time to come" and there are no plans on integration as of now.

Interestingly, L&T has itself been the target of a hostile takeover by Reliance Industries in the 1980s but its employees were able to stave off the bid.

Refusing to specifically answer a question on whether the deal is strategic or financial, Subrahmanyan said Mindtree will maintain its separate identity for "some time to come" and there are no plans on integration as of now.

He also refused to answer questions like whether L&T automatically gets Siddhartha's board seat on Mindtree or if it will increase its open offer price of Rs 980 per share in the scenario of a bidding war as "speculative" queries.

Agencies

Agencies

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