L&T has said that the newly acquired software firm will be run independently and the acquisition will create value for the group
Larsen & Toubro (L&T), which was a target of hostile takeover a few years back, is attempting a one of its own.
However, its bid to take over mid-sized IT player Mindtree is being fiercely opposed by the latter and its employees.
L&T claimed it has been offered a 20% stake in Mindtree by promoter V G Siddartha and now wants to buy a majority stake.
On Tuesday, managements of both the companies fought through a volley of words, leading to fall in their respective share prices.
The Mumbai-based construction giant has said that the newly acquired software firm will be run independently and the acquisition will create value for the group. On the other hand, Mindtree has called engineering giant's posture as "value destructive" and challenged L&T to build its own technology business.
"A hostile takeover by Larsen & Toubro, unprecedented in our industry, could undo all of the progress we've made and immensely set out organisation back. We do not see any strategic advantage in the transaction and strongly believe that the transaction will be value destructive for all shareholders," the Mindtree statement said.
Mindtree also asked what message L&T is giving to all start-ups in India, by behaving in such hostility with the first generation of entrepreneurs.
However, S N Subrahmanyan, chief executive officer, L&T, said, "The Board and Chairman have been advising us to look for opportunities from the services side,", adding, "Over the last few years, we have been giving more fillip, management interest and push into the services business." According to L&T, having an information technology portfolio makes an enormous sense as the inherent nature of these businesses is more profitable (compared to engineering and EPC businesses).
Calming the nerves over talk of 'hostile' takeover, L&T said Mindtree will continue to be an independent company and will not be integrated with L&T Infotech. But L&T's management, in the future, depending on the requirement, or situation, or as part of the growth strategy may eventually merge Mindtree.
Till the time, the Bengaluru-based firm would remain an independently operated company under L&T's fold, only Subrahmanyan and chief financial officer R Shankar Raman will oversee the operations and the chief executive will run the operations as now.
Among all the 'hostile' talks, for now, at the face value, Subrahmanyan wants to keep emotions aside, as "business is business". He also went on to add that Krishnakumar Natarajan, one of the co-founders of Mindtree was a "personal friend" who would continue to remain a friend post acquisition.
"There are certain emotions and trepidation involved, but business is business. Emotions do play a part, but emotionalities have to be overcome as we go forward. What we are trying to do, is with, if I can use the word 'pyaar', and we will continue to look at it as something we are doing from our 'dil'. And we will continue to look at it with the same manner and purpose," he said.
A few years ago, Mindtree had approached L&T, but the latter didn't show much interest. About three months ago, V G Siddhartha approached the company to take his 21% shareholding.
L&T Infotech is mainly into banking, manufacturing, oil and gas, insurance, while Mindtree is into CPG, retail, hospitality, travel, technology fields. L&T has been making moves to buy a 66% stake in the company by spending Rs 10,730 crore.
For L&T the investment in IT is justified, as much of the investments in the manufacturing side have already been done. According to Mindtree, if this investment or takeover happens, it will bring disruption to the relationships with their clients and partners apart from demolishing the shareholder value for both the companies.
Share prices of both, L&T and Mindtree fell on Tuesday. Mindtree saw the price falling by 2.03% (Rs 19.50) and closing at Rs 943, while L&T closed at Rs 1,356.75 down by Rs 22.10 or 1.60%.
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- L&T has said that the newly acquired software firm will be run independently and the acquisition will create value for the group.
- Mindtree has called engineering giant's posture as "value destructive" and challenged L&T to build its own technology business
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Mindtree also asked what message L&T is giving to all start-ups in India, by behaving in such hostility with the first generation of entrepreneurs.
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