Buyout group Apollo Global Management has teamed up with former SoftBank executive Marcelo Claure to explore a takeover of Millicom International Cellular that could value the Latin American telecom company at nearly $10bn, including debt, according to people familiar with the matter.
The group is considering an offer at a high price for the teenager’s shares, one of the people said. Nasdaq-listed Millicom shares closed at $14.83 on Tuesday, valuing the business at about $9bn, given its considerable debt.
People familiar with the matter cautioned that a deal may not be possible.
Apollo and Claure are trying to structure the deal in such a way that they don’t have to refinance or refinance about $6.9bn of Millicom’s existing debt, due to turmoil in financial markets and rising interest rates since the Federal Reserve began tightening its last policy. year.
Banks on Wall Street are still struggling to shed billions of dollars in debt tied to previously agreed private equity takeovers, limiting their willingness to write large new loans. The backlog has gummed up the pipeline for new deals, and dealmakers have warned that higher borrowing costs have reduced the attractiveness of many deals for leveraged buyout shops.
Apollo declined to comment. Claure and Millicom did not immediately respond to requests for comment.
Apollo’s interest in Millicom underscores the investment group’s appetite for investing in the communications sector, which has grown significantly in recent years.
Last year, Apollo paid $7.5bn to buy a unit from communications group Lumen Technologies. The division, named Brightspeed, provides phone and broadband services to more than 6 million customers in the US.
The deal is one of several high-profile takeovers that banks have been financing in the past year. Underwriters ended up lending Apollo $3.9bn themselves after failing to find lenders willing to lend to the business.
Claure also has plenty of experience in the telecommunications industry, having founded mobile phone distributor Brightstar in the late 1990s, before selling the business to Japan’s SoftBank in 2014 for $1.5bn.
He later became chief executive of U.S. mobile group Sprint in a turnaround effort that helped him gain a place in the inner circle of SoftBank boss Masayoshi Son. Claure was SoftBank’s chief operating officer until he left last year after a fallout with Putra.
Millicom is based in Luxembourg but operates mainly in Latin America under the Tigo brand for mobile and cable services, serving around 50 million subscribers. The company also partnered with Visa last year for its Tigo Money digital payment product.
Millicom’s share price has fallen more than 20 per cent in the past 12 months and its market capitalization is now around $2.5bn. The company has a dual listing on the exchanges in New York and Stockholm.
Millicom shares have been affected by the weak Colombian peso and concerns around the company burning through cash in the first nine months of 2022. The difficult macro environment and high inflation have raised questions about the group’s ability to meet its three-year equity-free target. cash flow.
According to a research note published by JPMorgan in November, Millicom is the most discounted telecommunications stock in Latin America as judged by enterprise value against operating free cash flow.