Millicom confirms takeover talks with Apollo and Claure

Millicom has confirmed that it is holding talks with Apollo Global Management and Marcel Claure’s investment outfit about a possible takeover.

The Latin American-focused operator group issued a short statement to that effect following market speculation over its future.

“The Board of Directors of Millicom International Cellular S.A. confirms that a potential acquisition of all outstanding shares in Millicom is being discussed with Apollo Global Management and Claure Group,” the telco said.

“There is no certainty that a transaction will materialize nor as to the terms, timing or form of any potential transaction,” it added, in customary fashion.

It seems the would-be investors are looking to capitalise on Millicom’s weak share price. Although it’s shares jumped on the news of a possible buyout, the operator’s stock has been on a downward trajectory for years. It closed at US$18.25 on Wednesday, having been trading at below $15 for about the past five months.

Indeed, the Financial Times, which broke the news ahead of Millicom’s confirmation statement, quoted research from JP Morgan last late year that described the telco as being “the most discounted telecom stock in Latin America as judged by its enterprise value against its operating free cash flow.”

France’s Xavier Niel clearly spotted an opportunity there too. His Atlas Investissement investment vehicle confirmed the purchase of a 7% stake in Millicom in November for an undisclosed sum.

“Atlas Investissement has identified Millicom as an attractive investment opportunity thanks to its strong position as a regional market leader in Latin America, high-quality assets and strong brand,” it announced at the time.

Speaking of money, Millicom – unsurprisingly – made no mention of a purchase price in its statement. However, the FT’s sources put a figure of around $10 billion on the deal, including debt; essentially, the buyers are looking at a figure of high-teens dollars per share, they said. That would have been ahead of the telco’s stock price at the time, but now roughly matches its market valuation.

The paper added that Apollo and Claure are seeking to structure their bid in a way that would avoid them having to repay or refinance around $6.9 billion in existing Millicom debt, due to rising interest rates and the ongoing economic situation.

Apollo itself has come up against this issue already with a telecoms buyout, the FT explains. It apparently struggled to get financing for the $7.5 billion deal it inked to buy what is now known as Brightspeed from Lumen last August – it was all once known as CenturyLink – and ended up with $3.9 billion in loans from underwriters after they were unable to find creditors willing to lend.

That doesn’t seem to be putting it off from making another foray into telecoms though.

Claure, meanwhile, is another well-known name in the industry. Marcelo Claure is perhaps best known as the former chief executive of Sprint, prior to its merger into T-Mobile US, and for his various high-profile endeavours at Japan’s Softbank, a company he bid adieu to a year ago. He has extensive experience in telecoms and an appetite for investment, particularly in Latin America.

Thus it’s reasonable to assume that this deal could well go ahead…providing the various parties can get the financing structure right, of course.

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