Apollo and Marcelo Claure explore buyout of LatAm telco Millicom

Buyout group Apollo World Administration has partnered with former SoftBank government Marcelo Claure to discover a takeover of Millicom Worldwide Mobile that might worth the Latin American telecoms firm at virtually $10bn, together with debt, in line with individuals acquainted with the matter.

The group is contemplating a bid at a excessive teenagers per share value, one of many individuals mentioned. Millicom’s Nasdaq-listed shares closed at $14.83 on Tuesday, valuing the enterprise at roughly $9bn, given its sizeable money owed.

The individuals acquainted with the matter cautioned {that a} deal won’t materialise.

Millicom’s Nasdaq-listed shares jumped as a lot as 19.1 per cent in early New York buying and selling on Wednesday after the Monetary Instances first reported the potential deal.

Apollo and Claure try to construction their bid in a means that might keep away from them needing to repay or refinance roughly $6.9bn of Millicom’s current money owed, given the turbulence in monetary markets and the big enhance in rates of interest because the Federal Reserve started tightening coverage final yr.

Banks throughout Wall Avenue are nonetheless struggling to dump billions of {dollars} in debt tied to beforehand agreed non-public fairness takeovers, limiting their willingness to write down massive new loans. The backlog has gummed up the pipeline for newer offers, and dealmakers have warned that the upper price of debt has diminished the attraction of many transactions for leveraged buyout outlets.

Apollo declined to remark. Claure and Millicom didn’t instantly reply to a request for remark.

Apollo’s curiosity in Millicom underscores the funding group’s urge for food to spend money on the communications sector, the place it has spent closely in recent times.

Final yr, Apollo paid $7.5bn to purchase a unit from communications group Lumen Applied sciences. The division, renamed Brightspeed, offers phone and broadband companies to greater than 6mn prospects within the US.

That deal grew to become one of many high-profile takeovers that banks struggled to finance final yr. Underwriters in the end lent Apollo $3.9bn themselves after failing to seek out collectors that had been prepared to lend to the enterprise.

Claure additionally has loads of expertise within the telecoms trade, having based cell phone distributor Brightstar within the late Nineties, earlier than promoting the enterprise to Japan’s SoftBank in 2014 for $1.5bn.

He then served as chief government of US cellular group Dash in a turnround effort that helped earn him a spot contained in the internal circle of SoftBank boss Masayoshi Son. Claure was SoftBank’s chief working officer till his departure final yr following a fallout with Son.

Millicom relies in Luxembourg however operates predominantly in Latin America underneath its Tigo model for cellular and cable companies, serving about 50mn prospects. The corporate additionally partnered with Visa final yr for its Tigo Cash digital funds product.

Line chart of share price ($), showing Millicom’s shares have slid over the past year

Millicom’s share value has fallen greater than 20 per cent prior to now 12 months and its present market capitalisation is about $2.5bn. The corporate has a twin itemizing on exchanges in New York and Stockholm.

Millicom’s inventory has been hit by the weak Colombian peso and considerations across the firm burning by means of money in the course of the first 9 months of 2022. A troublesome macro atmosphere and excessive inflation have raised questions in regards to the group’s capability to hit a three-year goal for fairness free money move.

In keeping with a analysis notice revealed by JPMorgan in November, Millicom was probably the most discounted telecom inventory in Latin America as judged by its enterprise worth in opposition to its working free money move.

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