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The promoters of IT company Mindtree have vowed that they would unconditionally oppose the attempted hostile takeover bid by Larsen and Toubro, and dubbed it a grave threat to the organisation.
"A hostile takeover by Larsen and Toubro, unprecedented in our industry, could undo all of the progress we've made and immensely set our organisation back," the promoters said in a statement on Tuesday.
The attempted hostile takeover bid of Mindtree by Larsen & Toubro is a "grave threat" and "value destructive" to the organisation collectively built over 20 years, the promoters said pledging to "unconditionally oppose" the hostile takeover attempt.
In the statement, the promoters -- Krishnakumar Natarajan (executive chairman), Subroto Bagchi (co-founder), Rostow Ravanan (CEO) and Parthasarathy N S (executive vice chairman and COO) -- went on to outline the move's potential "negative consequences to corporate culture, client relationships, employee retention".
"We don't see any strategic advantage in the transaction and strongly believe that the transaction will be value destructive for all shareholders. Our collective success depends on building and nurturing relationships with our clients and partners," it said.
They added that "this unexplainable transaction will bring disruption to those relationships and impair Mindtree's ability to differentiate itself in the market and continue to deliver client value and great shareholder return".
Promising their full commitment to long-term vision of building an independent company, the statement by promoters said that they firmly "believe it is in the best interests of our shareholders... and our organisation overall to continue opposing this takeover attempt".
Mounting the country's first hostile takeover bid in the IT sector, infrastructure giant Larsen and Toubro Monday made an offer to buy up to 66 per cent stake in the Mindtree for around Rs 10,800 crore.
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.
Will run it as independent entity, says L&T
Engineering major L&T, which mounted a hostile takeover of software firm Mindtree with a Rs 10,733-crore bid on Monday, ruled out merging it with its IT arm for the time being.
L&T on Monday announced a hostile takeover bid involving a three-pronged acquisition of Mindtree, wherein it will pay Rs 980 a share for 20.3 per cent stake of V G Siddharth, buying 15 per cent from the public and mounting an open offer at Rs 980 a share later.
Thus, it plans to acquire 67 per cent for a consideration of Rs 10,733 crore.
"We have not thought about integrating Mindtree with us (L&T Infotech). For the time being, it will be run as an independent entity," L&T Managing Director and chief executive S N Subramanyan told reporters on Tuesday.
Describing the deal as a meeting of two like-minded people, he said V G Siddharth, whose 20.3 per cent stake the company has bought out at Rs 980 a share, had approached them three months back for buying him out.
"It was a meeting of minds between us and Siddharth," Subramanyan said, adding the Cafe Coffee Day owner wanted to house his shareholding with a group where he saw the same governance values and ethics.
"The senior management at Mindtree are good friends with us and are people of repute and we see a lot of positivity in going ahead with the deal," he said.
He also reassured employees that L&T is an 80-year-old company with strong governance values.
"Mindtree will be run as an independent company, L&T will provide board oversight. We hope better sense and rationality will prevail," Subramanyan said.
L&T group CFO R Shanker Raman said there is a relative upside to Mindtree and that's what made them to buy the company and that both the companies (L&T Infotech and Mindtree) are USD 1 billion each and have enough opportunity to grow respectively.