Millicom says $4 billion buyout bid from Atlas is too low

Atlas Investissement, an investment vehicle owned by businessman and experienced telecoms investor Xavier Niel, has been working on an offer for Millicom for some time. It revealed in May that it was mulling a $24-per-share bid and ultimately tabled an offer of just that.

According to the financial newswires, that equates to an enterprise value of around $4 billion; Bloomberg puts the figure at $4.1 billion. But that's not sufficient for the telco group's board, which cites positive expectations for its financial performance going forward and the possible sale of its towers business as reasons for a higher price tag.

"Following deliberation, and after discussions with Millicom's financial advisors, the independent committee [of Millicom directors] unanimously believes and has informed Atlas that a $24 per share offer price would significantly undervalue Millicom and not be in the best interests of Millicom's shareholders," the operator said, in an SEC filing.

"The independent committee's belief takes into consideration, among other things, Millicom management's latest review of financial performance," it said. It noted that Millicom expects to generate equity free cash flow of more than $600 million for full year 2024, excluding $46 million in net proceeds from the sale of the firm's towers in Colombia, and that it will end the calendar year with leverage close to its intermediate target of 2.5x.

Millicom's Tigo Colombia unit – the group operates under the Tigo brand – agreed to sell 1,100 mobile towers to KKR in January. It is also working on a broader passive infrastructure monetisation endeavour though, having announced plans to spin off its towers businesses into a new unit more than two years ago. That process is still ongoing, although Millicom is not being particularly open about its progress.

"Millicom has entered into exclusive negotiations regarding a sale and leaseback of a large portion of its tower portfolio," it noted, pointing out that any proceeds from that manoeuvre are also excluded from its financial expectations outlined above.

The telco has not said an outright 'no' to Atlas' offer. Its committee will carefully review the information provided by Atlas alongside the offer and will issue a formal recommendation to shareholders in accordance with various regulatory requirements, it said. But it's safe to assume that this initial negative response to the offer will likely turn into a formal 'no' in due course.

It's also likely that there will be no increased offer from Atlas. The firm has been working on this bid for a while and clearly has a strong view on what would constitute a sensible bid for Millicom.

Atlas is already a major Millicom shareholder with a 20% stake, as it disclosed in February, having picked up an initial 7% holding last year, after the group was linked with a different potential buyer.

Millicom disclosed that it was holding takeover talks with Apollo Global Management and Marcel Claure’s investment arm in January last year, a point at which its shares were trading at around the $20 mark. A massive dip in stock price at the back end of 2022 – the telco's shares fell to a five-year low of under $11 in October that year – attracted opportunist investors although no deal materialised from the Apollo/Claure talks.

Niel did buy in though and was clearly playing a longer game. Millicom's shares are back up to above $24 and have been on a broadly upward trajectory for the past four months, so it’s hardly surprising that Atlas' $24-per-share offer was not warmly received.

The telco sees growth ahead and will hold out for a better offer. It all depends on whether financial investors believe it's worth paying more to buy in at this stage.