L&T may launch hostile takeover bid for Mindtree

DEAL DYNAMICS L&T set to sign a binding agreement to buy Siddhartha's stake

MUMBAI: Larsen and Toubro Ltd (L&T), which has been in talks to buy Cafe Coffee Day founder VG Siddhartha’s stake in Mindtree Ltd, is set to sign a binding agreement to close the deal, two people directly aware of the development said.

The transaction, which is likely to be announced in the weeks ahead, could trigger a hostile takeover bid, leading to an open offer by L&T, India’s largest engineering company, to increase its stake to 51%.

The move, if successful, could see Mindtree’s current management losing control of the company.

Siddhartha was one of Mindt r e e ’ s e arl y i nvestors and bought a 6% stake in 1999, the year it was founded. Over the years, he has increased his holding, giving an exit to existing shareholders, including Mindtree’s former chairman, Ashok Soota, who left in 2011.

While Siddhartha did not respond to an emailed query from Mint on the reasons for selling the stake, both the people cited earlier said that Siddhartha had in several tranches pledged almost the entire holding held by him and his two affiliate firms in Mindtree to several domestic and foreign lenders to borrow close to ₹3,000 crore, equivalent to the current value of his 20.4% stake in Mindtree.

“He (Siddhartha) is, however, behind schedule on repayments for several of these loan facilities taken by pledging shares,” one of the two people cited earlier said, requesting anonymity.

“If he is unable to regularize the accounts, it could lead to Nalanda India Fund Subroto Bagchi

Krishnakumar N. Graphic: Sarvesh Kumar Sharma/mint invocation of the share pledge by the lenders.”

“L&T is closely working with the lenders and Siddhartha to work out a solution and has offered a letter of comfort for a two-month moratorium on invocation of share pledges by the lenders,” the second person cited earlier said, also requesting anonymity.

“L&T is seeking a moratorium because it hopes to obtain antitrust approvals in key markets such as India, Europe and the US, where both Mindtree and L&T Infotech (a unit of L&T) are currently present.”

“I nvocation of t he share pledge by l e n d e r s wo u l d dampen L&T’S chances of taking control of Mindtree,” the second person added.

Mint reported on February 25 that private equity firm KKR and Co. was also in talks to buy Siddhartha’s stake and was backing a competing bid by Mindtree promoters, who own 13.32% in the firm and are reluctant to relinquish control.

The promoter group of Mindtree includes its co-founders Krishnakumar N, who holds a 3.72% stake; Subroto Bagchi, who has 3.11%; N.S. Parthasarathy, who has 1.43%; and Rostow Ravanan, who holds a 0.71% stake.

KKR, however, demanded a co-promotership in Mindtree Coffee Day Trading cr cr cr for proceeding with the deal, Mint reported.

Requests for comment sent to Mindtree promoters remained unanswered till press time on Tuesday. L& T, t oo, di d not respond to a request for comment by Mint.

The takeover battle for Mindtree has intensified in the past few months, with at least two large private equity funds, KKR and Baring PE Asia, apart from L&T, showing interest in the company.

The acquisition of Mindtree will help L&T Infotech to significantly expand its presence, with operations i n key markets across the world.

Mindtree has a strong presence i n t he t echnology and media industries, which are all potentially new areas of expansion for L&T Infotech.

UTI Asset Management Co. SIDDHARTHA WAS ONE OF MINDTREE’S EARLY INVESTORS AND BOUGHT A 6% STAKE IN 1999, THE YEAR IT WAS FOUNDED