L&T Infotech, Mindtree To Merge In A Share-Swap Deal
The two companies have a combined market cap of about Rs 1.37 lakh crore.
Larsen and Toubro Ltd. will combine its two software subsidiaries to build a bigger client pool and diversify revenue when demand for digital services continues to surge.
The board of L&T Infotech Ltd. approved a scheme of arrangement to merge Mindtree Ltd. with itself in a share-swap deal, according to their exchange filings on Friday.
L&T Infotech will issue 73 equity shares (face value Re 1 each) for every 100 equity shares (Rs 10 face value each) held in Mindtree.
L&T, which owns 61% of Mindtree and 74% of L&T Infotech, will hold 68.73% in the combined entity. Debashis Chatterjee, chief executive of Mindtree, will be the CEO of the merged company.
The merger, however, is subject to shareholder, creditor, exchange and regulatory approvals. Till then, the two companies will continue to operate independently.
The deal will end Mindtree's run as an independent company, two years after L&T took control in a Rs 10,730-crore hostile takeover. The merger will create a technology company with a market value of more than Rs 1.36 lakh crore. The merger comes when client spending on technology is expected to grow after the pandemic accelerated digital shift.
L&T Group Chairman AM Naik (right) and MD SN Subrahmanyan address media while announcing the merger of L&T Infotech and Mindtree. (Source: BloombergQuint)
The combined business will "augment industry-leading revenue growth and profitability", drive cost efficiencies and synergies, and create more opportunity for growth in customer relationships and value creation, the exchange filings said. It will also enable the combined business to cross-sell and up-sell, achieve a higher number of active clients, cater to a wider customer base and diversify their combined revenue profile with reduced concentration risk, they said.
The two companies have a minimum overlap and they hardly approach the same customers, AM Naik, chairman at L&T, said at a press conference while announcing the deal. Up to 90% of the business is different, he said.
LTI Press Conference: Key Takeaways
"I don't think there is any cultural issue," said Naik.
We are creating an integration committee independent from those who run the companies, Naik added.
Till merger, companies will work Independently and towards meeting FY23 budgets.
Engineering services company will not be merged into LTI-Mindtree.