Mindtree’s Independent Directors Must Guide Shareholders On L&T’s Takeover Bid, Says IiAS

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Mindtree Ltd.’s independent directors must provide “objective guidance” to shareholders on whether Larsen & Toubro Ltd.’s open offer is in the company’s long-term interest, proxy advisory firm Institutional Investor Advisory Services India Ltd. said in a note.

Investors may not be in the position to understand all the nuances, the note said, adding that it may be damaging if the Bengaluru-based technology firm’s leadership and key staff leave the company with key clients upon a takeover.

The advisory firm said that the independent directors are best placed to articulate their stand on the several issues related to the transaction. “They’re in the best position to judge whether it’s going to be disruptive,” Amit Tandon, managing director at IiAS told BloombergQuint. “If it is debilitating for the company’s future prospects, they can advise the shareholders accordingly, and if they feel that the company is going to be in safe hands, they can again advise accordingly.”

IiAS said it’s is not necessary that Mindtree’s independent directors tow the line with the company’s promoters. Mindtree has four Independent Directors—Akshay Bhargava, Apurva Purohit, Bijou Kurien and Milind Sarwate—on its board.

L&T seeks to buy a controlling stake in Mindtree after it entered into an agreement with Coffee Day Enterprises Ltd. Founder VG Siddhartha to buy his 20.3 percent shareholding in the mid-sized IT firm for Rs 980 a share.

It also intends to purchase an additional stake of up to 15 percent from the open market at up to Rs 980 a share and has also announced an open offer to shareholders of Mindtree to acquire another 31 percent at Rs 980 a share. This three-step transaction will give L&T between 20.3 and 66.3 percent of Mindtree at a total cost of up to Rs 10,730 crore.

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