The merger of Larsen & Toubro Infotech (LTI) and Mindtree could be announced soon as the boards of the IT companies are likely to meet next week, according to people in the know of the matter. Bengaluru-based Mindtree was acquired by L&T in 2019.
The CEO and MD of the merged entity will likely be Mindtree CEO Debashis Chatterjee. Moreover, the CFO and CHRO of the combined group are also expected to be from Mindtree. The Mindtree brand will be discontinued after the proposed merger, according to sources quoted by Economic Times.
“The boards are meeting on May 6 to finalise and bless the merger. This has been in the works for weeks. Without scale, this vertical will remain a laggard” said one of the persons.
The parent company Larsen & Toubro (L&T) owns 74.05 per cent of LTI while 60.99 per cent of Mindtree. As per the people aware of the development, the share swap ratios are being finalised for the merger. Neither will a premium be given to Mindtree shares, nor a significant discount to LTI shares.
After releasing their fourth-quarter earnings, the CEOs of both the IT firms told ET that they have been collaborating to win large deals where clients seek end-to-end technology solutions. “Ever since this management change happened, I was given a mandate to operate Mindtree as an independent entity but also collaborate wherever there was an opportunity to do so, which I have done quite a few times in the last two and a half years during my stint,” said Mindtree’s Chatterjee.
As of March, LTI and Mindtree had 762 active clients, of which 11 were above the $50 million range. If the merger is finalised, the combined entity will have a little over 80,000 employees, including around 4,000 sales and support staff.
How analysts view the merger
“The merged entity will have a diversified portfolio as two companies have strong positions in different service offerings,” said the head of research at a global financial institution.
IIFL analysts opined that both companies have complementary capabilities, verticals and client exposures. “We believe this may not be a bad time for initiating the merger process, as both companies now have a similar growth and margin profile, with a strong FY23 outlook,” said the firm.
LTI and Mindtree on merger reports
Meanwhile, after reports of Larsen & Toubro mulling over merging its tech arms — Mindtree and L&T Infotech — into a $22 billion firm surfaced recently, both the IT firms responded saying the news is speculative in nature.
L&T infotech said that the Company does not comment on any speculation in the market/media. Mindtree echoed the same stating that there is no information available with the company as of today, which is required to be reported under extant SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, and which may have a bearing on the stock price of the company.
