Mindtree takeover battle: Why L&T’s promise to run Mindtree independently is flawed

Larsen & Toubro’s move to scale up in IT miscomputes. The Indian engineering-to-financial services conglomerate, led by AM Naik, has initiated a hostile bid for control of Mindtree, valuing the Mumbai-listed outsourcer at 155 billion rupees ($2.2 billion). Yet the suitor’s promise to run the outfit independently, outside its existing IT businesses, undermines the whole venture.

It’s a multi-stage bid. Pending regulatory approvals, $28 billion L&T wants to pick up 20 percent of its target through the top shareholder, an operator of a large coffee chain, at 980 rupees per share. It would then buy a further 15 percent through the open market. The conglomerate plans to eventually build up to 66 percent through an open offer, at a price to match its initial purchase.