After L&T's takeover bid, Mindtree may still go ahead with buyback plan

After the “hostile” takeover bid by engineering major L&T for Mindtree, the management of the Bengaluru-headquartered firm still sees a possibility of going ahead with its proposed buyback offer with some procedural clearance. The company, which is holding its board meet on Wednesday, will deliberate on legal recourse available before it to thwart the takeover bid.

“According to the legal advice, which we have got, if an open offer is made at the time of a proposed buyback, the proposal has to be approved by 75 per cent of shareholders. Procedurally, it is possible but it has to cross certain regulatory thresholds,” said Rostow Ravanan, CEO & co-founder of Mindtree.

Prior to the L&T’s move to take controlling stake in the IT services firm, Mindtree had announced its board would consider a buyback on its March 20 meet. Though management had said the buyback was part of its capital allocation strategy and was in sync with the moves of other industry peers, many industry experts had perceived this as a move to ring-fence the firm from a hostile acquisition bid.

 

However, L&T after entering into an agreement with VG Siddhartha, promoter of Coffee Day Enterprises, to buy his entire 20.32 per cent stake in Mindtree on Monday, has also placed orders to purchase additional 15 per cent stake in the company. As both these transactions reached the open offer trigger of 25 per cent, the engineering major has also made an open offer to buy more 31 per cent stake in the company. 

All these deals, however, will only go through post regulatory clearance including mandatory approval from the Competition Commission of India (CCI).

“As the share purchase agreement with Siddhartha will only go through post the regulatory clearances, there is no change in the shareholding pattern so far. In that case, if Mindtree board considers the buyback before the change in shareholding, then buyback proposal can be taken up,” sources close to the development said.

‘Remember, you hold the Tree’

Rostow Ravanan, CEO, Mindtree

Mindtree employees, to whom the mid-sized IT services firm terms Mindtree Minds, were certainly a worried lot. As the news of a takeover attempt by L&T on Mindtree reached them through mails from CEO Rostow Ravanan (pictured) on Tuesday morning, they were concerned and anguished for such overtures. “I came to know about this today . I am little concerned what will happen eventually but we will support our company," said an employee who has spent two years now in Mindtree. 

Some of the employees at the Bengaluru-headquartered firm had also launched a Twitter campaign using the hashtag #MindtreeMatters, to extend their support to the company. Meanwhile, after resigning from government role last week, Subroto Bagchi, co-founder was back at the company headquarters to engage with all stakeholders, including employees. Bagchi, who was designated as ‘Gardener’ owing to his people-management skills, tried to assuage the concerns of the employees in an internal mail saying the founders of the company would be the first line of defence.
 

“Stay the course. Remember, you hold the Tree," reads his mail that was reviewed by Business Standard.