L & T will not increase the Mindtree offer price
BENGALURU: The Board Of L & T Has Chosen Vigorously Not To Increase The Open Offer Mindtree Shareholders Even Though Confidence In Reaching 26% Property In The Middle Layer IT Service Company.
L&T Launched A Hostile Acquisition Bid For Mindtree After Snapping Up A 20.4% Stake Hero By The Largest Shareholder And Coffee Day Founder VG Siddhartha .
L&T's decision not to raise the offer comes just days before Mindtree 's independent directors are scheduled to take a call on the Rs 980 per share price. In March, L&T mounted a Rs 10,700-crore bid to buy 66% in Mindtree in a three-staged transaction. It includes a plan to buy 31% from public shareholders through an open offer, and another 15% through open market purchases .
Mindtree founders - who together own 13.3% - are resisting the takeover bid, and have said the L&T offer undervalued the company. The opinion of independent directors is keenly watched as the company management and founders argue that the L&T offer is probably a good investment bet, but not an attractive acquisition price .
Top L&T executives said they considered all material facts before deciding against a higher offer price. "The Mindtree stock has traded on an average of 16.5 times over the last five years. The offer given by L&T is at 21 times its earnings. The guidance given by Mindtree points to a 10% expansion in net profit annually. The same number multiplied by 16.5 times earnings will translate into a fair value of Rs 851 per share for Mindtree as against the Rs 980 per share offered by L&T. So, the offer is already at a significant premium to the fair value and the traded value," they said .
Once L&T reaches 26% holding, it's likely to call for a shareholder meeting of Mindtree , in which it would try to gain a role in shaping growth and governance strategies. L&T would also seek board representation and might also ask for promoter status. "We want better board practices. You can't have a company that in the name of dividend proposes to vacate 53% of the company's cash for this quarter and 70% for the year," L&T sources said .