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Mindtree promoters have opposed L&T hostile takeover bid. (Mint)
Mindtree promoters have opposed L&T hostile takeover bid. (Mint)

Mindtree board fails to decide on share buyback amid L&T takeover bid

  • Mindtree says its board considered a share buyback proposal but decided to discuss it at a future date
  • Larsen and Toubro (L&T) made a hostile takeover bid to buy up to 66% stake in Mindtree for around 10,800 crore

New Delhi: Mindtree Ltd’s board meeting on Wednesday ended with the company’s eight directors failing to decide on whether to buy back the company’s shares to fend off a hostile takeover bid by Larsen and Toubro Ltd (L&T). A share buyback by the software services company could potentially push up the acquisition cost for L&T, which had earlier this week bought 20.32% stake in Mindtree from V.G. Siddhartha and two of his affiliate companies for 3,269 crore. L&T is looking to acquire more shares with the aim of gaining control of Mindtree.

“The board considered the proposed buyback of equity shares of the company at its meeting held on 20 March… Following detailed discussions, the meeting has been adjourned to a future date. No decision has been taken in relation to the proposed buyback of equity shares," Mindtree said in a statement sent to stock exchanges on Wednesday.

Proxy advisers InGovern Research and Institutional Investor Advisory Services have questioned the Mindtree share buyback proposal. “Under Section 26 of Sebi takeover code, subsequent to a public announcement of an open offer, a company cannot undertake any capital structure change, including buyback of shares," said Shriram Subramanian, founder and managing director of InGovern Research.

ALSO READ | L&T-Mindtree deal makes a case for dual-class shares in India

On Monday, L&T said it would make open market purchases of up to 15% of Mindtree’s share capital and later offer to buy an additional 31% stake at 980 apiece through an open offer.

For now, Mindtree’s founders claim that they have the support of large institutional investors, which hold a combined 20.2%, implying that shareholders with 33.52% of voting rights, including the promoters’ 13.32% stake, are opposed to L&T’s takeover bid at the current price

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