Private equity firm KKR and Co. has offered ₹3,100 crore to buy the stake held by Café Coffee Day (CCD) founder V.G. Siddhartha and his two firms in information technology (IT) services firm Mindtree Ltd, said two people directly aware of the development.
The latest offer, proposed at a meeting on Thursday, makes KKR the highest bidder for the 20.4% stake held by Siddhartha and his two affiliate firms in Mindtree, the two people said, requesting anonymity.
KKR offers ₹3,100 crore to purchase Siddhartha’s stake in IT firm Mindtree
KKR’s latest offer is not only higher than what it had proposed to pay earlier, but the private equity firm also softened its original terms to gain sole control of Mindtree.
An email sent to Mindtree remained unanswered, while a KKR spokeswoman said, “We do not comment on market speculation.”
In the previous round of discussions between KKR, Siddhartha and Mindtree promoters in January, KKR had offered up to₹850 a share, or around ₹2,800 crore, to buy Siddhartha’s stake, but had put a condition that KKR be given sole control of Mindtree through an open offer that involves an additional purchase of 5% from the promoters or the existing public shareholders.
Shares of Mindtree rose 0.57% to ₹903.10 on BSE on Friday.
A purchase of more than 25% stake in a listed firm triggers a mandatory open offer that requires the buyer to purchase at least an additional 26% from public shareholders.
As Mindtree promoters, who own 13.32% in the firm, are reluctant to relinquish control, in the latest round of discussions KKR has offered to pay at least ₹925 a share to buy Siddhartha and his firms’ stake in Mindtree and has agreed not to buy any additional stake at the moment to seize control from existing Mindtree promoters.
KKR has, however, demanded a co-promotership in Mindtree for proceeding with the deal.
“The contours of the deal were discussed between KKR and Mindtree promoters on Wednesday and Thursday,” said the first person. “Apart from Siddhartha’s stakes, KKR wants to buy adequate voting rights to become a co-promoter of Mindtree, along with the existing promoters.” The person added that the investment committee of KKR had approved a proposal to buy the 20.4% stake in Mindtree.
On 6 December, Mint first reported that KKR had evinced interest in buying the stake in Mindtree from Siddhartha and the two firms controlled by him.
According to the norms of the Securities and Exchange Board of India, which regulates publicly traded firms, if any entity makes a hostile bid, independent directors are required to tell the company’s shareholders why the bid was rejected or accepted.
The promoter group of Mindtree includes its co-founders Krishnakumar N., who holds a 3.72% stake; Subroto Bagchi, who has 3.11%; N.S. Parthasarathy, who has 1.43%; and Rostow Ravanan, who holds a 0.71% stake.
Engineering and construction conglomerate Larsen and Toubro Ltd, L, which owns L&T Infotech Ltd, is also in the race to acquire control of Mindtree by purchasing Siddhartha’s stake.
The race to acquire Siddhartha’s stake in Mindtree has gathered momentum in recent weeks after three of the four independent directors of Mindtree nudged the company’s promoters to either allow the suitors to gain control of the company or be ready with sufficient funds to buy Siddhartha and his CCD firms’ 20.4% stake to retain promotership.
Mint has spoken to three independent directors of Mindtree.
The first person cited earlier said that an additional 5% stake in Mindtree might be bought by KKR later from the open market or any public shareholder or promoters, only when the promoters were comfortable with transferring control of the company.
According to L&T’s plans, the conglomerate will buy Siddhartha and his two firms’ stake first and then buy an additional 5% to make an open offer for gaining complete control of Mindtree.
Mindtree’s stake sale discussions have been on for at least nine months now, but Siddhartha and his two CCD affiliate firms confirmed only a week back on exchanges that they were looking to monetize their stake in Mindtree.
This has put Mindtree promoters in a quandary. On 15 January, Mint reported that the promoters of Mindtree are faced with a stay-or-sell dilemma as the company’s largest investor nears a decision to sell his stake. They could either accept a buyout offer and cede control or decide against selling and see their net worth potentially erode, said the report.
“The final buyer is likely to be shortlisted within the next fortnight,” said the second person.
If L&T wins the bid by offering a higher price to Siddhartha under amicable terms to Mindtree promoters, after acquiring a controlling stake in Mindtree, L&T will most likely merge the company with L&T Infotech and L&T Engineering to create a company large enough to compete with Infosys, TCS, Wipro and HCL.