Larsen & Toubro (L&T) on Friday announced a merger between two of its publicly traded software companies L&T Infotech and Mindtree to create a large-scale IT services provider exceeding $3.5 billion, subject to shareholder and regulatory approvals. 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. Parent company L&T will hold 68.73% stake in LTI after the merger.

“The Boards of Directors of Mindtree and LTI at their respective meetings held today approved a composite scheme of amalgamation of both these independently listed IT services companies under the Larsen & Toubro Group,” Mindtree says in an exchange filing on Friday.

The development came nearly three years after L&T acquired a controlling stake in Bengaluru-based Mindtree in the country’s first hostile takeover bid in IT space. In 2019, L&T had initially acquired a 20.4% share in Mindtree from coffee baron late V.G. Siddhartha and affiliate firms, followed by 31% additional stake through an open offer. L&T currently owns 60.99% shares in the mid-sized IT company.

As per the filing, the proposed merger will see Mindtree and LTI joining strengths to create an efficient and scaled up IT services provider exceeding $3.5 billion. Post merger, the new shares of LTI will be traded on the domestic bourses the BSE and the NSE. The name of the combined entity will be “LTIMindtree” leveraging the advantages of both the brands and creating value for all the stakeholders.

“Both Mindtree and LTI have delivered market leading financial performance and created value for shareholders. Given that recent industry shifts (e.g., prominence of large deals, preference for end-to-end offerings) are benefitting at-scale players, the two companies have decided that the time is appropriate to combine the strengths of both organisations to better serve the customers,” the filing says.

The release states that both the companies will continue to function independently till merger. A steering committee will be constituted to oversee the transition till the merger process is complete, it adds.

Speaking about the merger, A. M. Naik, Chairman, Mindtree, says, “This merger represents our continued commitment to grow the IT services business in line with our strategic vision. The highly complementary businesses of Mindtree and LTI will make this integration a ‘win-win’ proposition for our customers, investors, shareholders, and employees.”

“We are confident that the proposed merger will help us build on the combined strengths of both these organisations to unlock synergies through scale, cross-vertical expertise, and talent pool. This will help us emerge as a partner of choice for large-scale tech transformations and create a distinctive employee value proposition,” says S. N. Subrahmanyan, Vice Chairman, Mindtree.

Mindtree had appointed KPMG India Services as financial advisor and JSA (Advocates and Solicitors) as legal advisors. Goldman Sachs (India) Securities provided fairness opinion to Mindtree on the valuation done by the valuer for the proposed transaction. Ernst & Young Merchant Banking Services LLP were appointed as valuers by Mindtree.

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