Infrastructure major Larsen & Toubro (L&T) has completed the takeover of Mindtree, a Bangalore-based IT services provider, by raising its stake to around 60%. This is the first hostile takeover of a software firm in India and Mindtree CEO Rostow Ravanan is likely to resign in a few weeks.
Mumbai-based L&T began its Mindtree takeover bid after it entered into a deal with V.G. Siddhartha, a long-term investor, in March. The acquisition of his 20.4% stake was completed in May after L&T bought more than 32.7 million shares held by Siddhartha for 32.69 billion rupees (US$47.22 million).
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After that L&T bought additional shares of Mindtree from the open market, raising its holding to 28.9%. Thus the company crossed the threshold of the 25% stake needed to make an open offer for Mindtree.
It made the open offer starting June 17 to buy 51.3 million shares, or a 31% stake in the company, for 980 rupees a share. It managed to complete the open offer two days before its closing date of June 28.
Some of the institutional investors who sold their stake during the open offer include Singapore-based Nalanda Capital (10.61%), UTI Mutual Fund (2.97%), Amansa Holdings Pvt. Ltd (2.77%), Arohi Asset Management (2.74%) and Franklin Templeton Asset Management (India) Pvt Ltd (1.06%). One of the founding members of Mindtree, S. Janakiraman, also sold his entire 1.52% stake during the open offer.
Mindtree’s promoters N. Krishnakumar, N.S. Parthasarathy, Subroto Bagchi, and Rostow Ravanan, along with their families, own 13.32% in the company.
L&T also plans to acquire a further 6% shares from the open market and aims to hold 66.32% in Mindtree, worth at least 108 billion rupees ($1.56 billion).
Industry watchers see top-level changes in Mindtree after the L&T takeover. As L&T runs its own information technology unit L&T Infotech, they believe the two entities may be merged in a couple of years.
Founded in 1999 by 10 information technology professionals, Mindtree currently employs more than 20,000 employees and has offices in over 17 countries. It got listed in the Bombay Stock Exchange and National Stock Exchange in 2006.