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M&M aquires stake in BT

by VARINDIA 2010-12-15

Mahindra & Mahindra Ltd (M&M) has acquired 5.5% stake in its joint venture IT services firm Tech Mahindra from partner British Telecommunications (BT) for Rs 451 crore ($100 million) completing a transaction it had announced few weeks ago. This gives the automotive and flagship group company of the Mahindras near majority in Tech Mahindra while providing a part exit for BT that had been eyeing exit from the company.

On Tuesday, M&M acquired the stake from BT in a bulk deal on NSE at a price of Rs 653.6 per share, a 1% premium to closing price of Tech Mahindra in the stock exchange on Monday. The Tech Mahindra scrip rose almost 4% to close at Rs 673.9 on Tuesday.

BT had 30% stake as of September 30 and sale of 5.5% brings it down to 24.5%, diluting its veto power on board decisions. While giving M&M near majority control, it ensures a prospective acquirer of BT's remaining stake will not create trouble for the promoter in the future.

Given the structure of the transaction, it could well indicate that BT could sell the remaining stake to one or more PE firms as M&M does not appear too keen to spending big money to get access to additional stake in the company.