Mindtree board abandons share buyback, decides to form advisory panel
26 March 2019
Members of the board of Bangalore-based software service firm Mindtree have abandoned the idea of a share buy-back to avert the company falling into the hands of engineering and construction major Larsen & Toubro and instead decided to advise the board on the share buyback proposal.
At a meeting on Tuesday the panel of directors of Mindtree Ltd decided to call off its buyback plan, according to an exchange filing by the company.
The board also decided to immediately constitute a committee of independent directors (IDC) in the interest of all stakeholders to provide their reasoned recommendations in this respect,
On 18 March, L&T announced it will launch an open offer to buy 31 per cent stake in Mindtree, after purchasing a 20.32 per cent stake at Rs980 per share from Mindtree’s largest shareholder group, including Café Coffee Day founder VG Siddhartha and two affiliate firms of CCD — Coffee Day Enterprises Ltd and Coffee Day Trading Ltd. L&T said it will also buy 15 per cent additional stake in Mindtree separately from the open market.
L&T will be paying Rs3,269 crore to buy out the 20.32 per cent stake that Siddhartha and his two firms hold in Mindtree while the entire 66.3 per cent in Mindtree will cost L&T Rs10,700 crore.
On Tuesday, L&T and Mindtree announced the details of the open offer, which will be open for shareholders of Mindtree from 14 May to 27 May, 2019.
Following a board meeting on Tuesday, the Mindtree board said it will not proceed with the buyback of equity shares. The buyback plan was devised primarily to fend off the open offer proposed by L&T and the potential takeover by the latter.
Following Tuesday’s board meeting, Mindtree said that the board invited views from the company’s directors on the unsolicited offer (open offer) made by L&T and after deliberation, the board decided to immediately constitute the committee of independent directors (IDC) in the interest of all stakeholders to provide their reasoned recommendations in respect of the unsolicited offer by L&T for the consideration of shareholders.
“All the independent directors will be members of the IDC, and the IDC has elected Apurva Purohit, lead independent director, as the chairperson of the IDC. The IDC will consider and evaluate all aspects of the unsolicited offer, taking into account all relevant facts, circumstances, data related to the company and the industry and the interests of all stakeholders involved. This committee will be supported by independent legal and financial advisers to help it with its deliberations,” Mindtree stated in its exchange filing.
Tuesday’s meeting comes after the Mindtree’s board meeting on 18 March failed to reach a consensus conclusion, on account of which, no decision over the buyback proposal was taken. The directors are also expected to discuss the company’s quarterly financial results in the meeting.