What the L&T-Mindtree hostile takeover bid means for mutual fund investors (2024)

FAQs

What is the hostile takeover of L&T? ›

Recently, in 2019, the Indian IT sector witnessed its first ever hostile takeover where Mindtree Limited (“Mindtree”), was acquired by Larsen and Toubro Limited (“L&T”).

L&T was the leading engineering, technology and construction, manufacturing and financial services conglomerate of India. L&T had presence in the fast-growing information technology and technology services (ITTS) sector and was looking to consolidate its position through this acquisition.

LTI Mindtree Merger Ratio

As part of the merger, all shareholders of Mindtree were issued shares of LTI in the ratio of 73 shares of LTI for every 100 shares of Mindtree.

The merger of Larsen & Toubro Infotech (LTI) and Mindtree received approval from National Company Law Tribunal (NCLT) and subsequently both the companies would be operating as a merged entity from November 14, 2022, said A. M. Naik, Group Chairman, L&T and Chairman of LTIMindtree.

Hostile takeovers, even if unsuccessful, typically lead management to make shareholder-friendly proposals as an incentive for shareholders to reject the takeover bid. These proposals include special dividends, dividend increases, share buybacks, and spinoffs.

The acquiring entity benefits from increased profits, reduced costs, economies of scale, and greater market share. Sometimes, the acquirer may get monopoly power by acquiring a small competitor with a strong industry position.

Following the Merger, Mindtree shareholders will receive 73 LTI shares for every 100 Mindtree shares they hold on the record date, November 24, 2022. For example, if you hold 200 Mindtree shares in your Demat account, you will be entitled to receive 146 LTI shares in your Demat account.

It's good. Together they can compete with top player and will become a giant like TCS and Infosys. Anyways, both belongs to same parent organisation L&T, so this merger makes sense.

What Is a Hostile Takeover? A hostile takeover happens when an entity takes control of a company without the knowledge and against the wishes of the company's management. A hostile takeover is an acquisition strategy requiring that the entity acquire and control more than 50% of the voting shares issued by the company.

The L&T Group has announced operationalisation of the merger of Mindtree with LTI (Larsen & Toubro Infotech), effective November 14. The new entity, LTI Mindtree, will begin trading from November 24. Mindtree shareholders will get 73 LTI shares for every 100 shares they hold post merger.

Is LTI and Mindtree merger good or bad? ›

Motilal Oswal has retained a 'neutral' rating on both stocks as it sees near-term risks offsetting the long-term opportunity accruing from the larger entity. NEW DELHI: The LTI-Mindtree merged entity offers strong long-term prospects and analysts feel it could enjoy a premium to larger peers Infosys and TCS.

Mindtree merger

In May 2022, it was announced that Mindtree, which was then a different IT services subsidiary of Larsen & Toubro, will be merged into LTI, and the company will be renamed as LTIMindtree. Larsen & Toubro Group chairman A. M.

As per the agreement, the merger will be a share swap deal at a ratio of 73 shares of LTI for every 100 shares of Mindtree. The merger between L&T Infotech and Mindtree has finally been completed on Monday, six months after the deal was announced, following the approval from National Company Law Tribunal (NCLT).

L&T Infotech and Mindtree have received merger approval and will begin operating as a merged entity on November 14, becoming the country's fifth-largest IT provider by market capitalisation and sixth-largest by revenue. This is one of the largest mergers in the Indian information technology (IT) sector.

Currently, the company boasts revenues in excess of $4 billion, serving more than 700 clients in 30 countries, with a team of over 82,000 employees. With the merger in place and the combined entity functioning smoothly, the next goal is to expand the company's size and reach.

During his tenure, Anil Naik faced challenges from fellow Gujarati businessmen Kumar Mangalam Birla and Dhirubhai Ambani, who attempted to take over L&T. Defending L&T against these takeover attempts was a difficult task.

Key Takeaways. A hostile takeover occurs when an acquiring company attempts to take over a target company against the wishes of the target company's management. An acquiring company can achieve a hostile takeover by going directly to the target company's shareholders or fighting to replace its management.

A hostile takeover is a type of acquisition where a company (the acquirer) takes control of another company (the target company) without the approval or consent of the target company's board of directors. In other words, the target company's management is not in favor of the takeover, hence the term "hostile".

In contrast, hostile takeovers often come about after a target company's management has either rebuffed or refused to engage with the potential acquirer. The acquirer appeals directly to the target's shareholders, typically offering a premium price for the stock and a plan to boost the company's future prospects.