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L&T's open offer to Mindtree's shareholders stuck in limbo over Sebi norms; regulator examining conditions for bid

  • A company should launch an open offer within 55 days from the date of a public announcement

  • A company can trigger the open offer only when it goes past the threshold of 25% voting rights

  • L&T had made an offer to buy up to 66% stake in the Mindtree for around Rs 10,800 crore

Infrastructure major Larsen & Toubro's (L&T) move to launch an open offer to Information Technology firm Mindtree's shareholders has been stuck in limbo after market regulator SEBI started examining the conditions in connection with the bid.

L&T reportedly went past the deadline fixed under the Securities and Exchange Board of India (SEBI) regulations in this regard, according to Business Standard.

As per the SEBI rule, a company should launch an open offer within 55 days from the date of a public announcement, said the report. The infra major made an open offer on 18 March.

Another issue surrounding the delay is over the question of whether the company crossed the threshold of 25 percent voting rights in Mindtree, said a report in The Hindu Business Line.  L&T held less than 25 percent in Mindtree at the time of making the announcement, sources told The Hindu Business Line.

According to SEBI’s Substantial Acquisition of Shares & Takeovers (SAST) Regulations, a company can trigger the open offer only when it goes past the threshold of 25 percent voting rights, said the report.

Accordingly, the open offer to acquire 31 percent of Mindtree stake may be delayed due to these regulatory issues.

L&T makes 66% Mindtree stake buy offer

In March this year, in the country's first hostile takeover bid in the IT sector, L&T had made an offer to buy up to 66 percent stake in the Mindtree for around Rs 10,800 crore.

 L&Ts open offer to Mindtrees shareholders stuck in limbo over Sebi norms; regulator examining conditions for bid

Representational image. Reuters.

L&T entered into a deal to buy Cafe Coffee Day owner V G Siddhartha's 20.32 percent stake in Mindtree and had also placed an order with brokers to pick up another 15 percent of the company shares from the open market.

Subsequent to these deals, L&T would make an open offer to buy an additional 31 percent stake through an open offer.

L&T would pay Siddhartha Rs 3,269 crore and Rs 5,030 crore for the open offer, as per filings made by L&T and Mindtree.

Accordingly, earlier this month, L&T purchased the stake of Siddhartha and Cafe Coffee Day in Mindtree through a block deal for about Rs 3,210 crore and has since topped that up with share purchases from the open market.

On Wednesday, L&T acquired about 98,000 shares of Mindtree from the open market, taking its shareholding in the IT services firm to 28.87 percent, according to a regulatory filing.

On Monday, L&T had acquired 2.3 lakh shares of Mindtree, followed by another 3.56 lakh shares on Tuesday from the open market. In the week of 20-24 May, L&T had purchased shares worth over Rs 316 crore.

Two weeks ago, L&T Group Chairman A M Naik said that acquisition of Mindtree was the topmost agenda for his company and eventually the mid-sized IT firm was going to be transformed into a big company, he said.

L&T would launch the open offer to buy additional stake in around 10 days, he had said then.

Elaborating on Mindtree promoters' opposition to the hostile takeover bid, Naik said they are obviously attached to their company but have started to realise that L&T is also an employee-centric organisation.

In March this year, Naik, while defending the takeover bid of Mindtree, had said that his firm was open to talks with the IT services firm's founders to allay their concerns.

Mindtree promoters oppose L&T takeover bid

Mindtree founding promoters Subroto Bagchi, Krishnakumar Natarajan, Rostow Ravanan, and Parthasarathy NS were against the L&T's takeover bid of the IT firm.

The promoters of Mindtree vowed that they would unconditionally oppose the attempted hostile takeover bid 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.

It all began after Siddhartha began talks to sell his 21 percent shareholding in Mindtree to address his liquidity issues. He was then the single largest shareholder in the mid-size IT services headquartered in Bengaluru.

Updated Date: May 30, 2019 17:31:33 IST