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Apollo and Marcelo Claure in talks over buyout of LatAm telecom Millicom

Buyout group Apollo Global Management and former SoftBank executive Marcelo Claure are in talks with Millicom International Cellular about a takeover that could value the Latin American telecoms company at about $10bn, including debt, said people briefed on the matter.

The group is considering a bid at a high teens per share price, one person familiar with the matter said. Millicom’s Nasdaq-listed shares closed at $14.83 on Tuesday, valuing the business at roughly $9bn, given its sizeable debts.

Luxembourg-based Millicom confirmed the talks in a statement on Wednesday, after the Financial Times first reported that Apollo and Claure had partnered for a potential deal.

Millicom said there was no certainty that a transaction would materialise.

Shares trading in New York jumped 23 per cent on Wednesday after the FT first reported the potential deal.

Apollo and Claure are attempting to structure their bid in a way that would avoid them repaying or refinancing about $6.9bn of Millicom’s existing debts, given the turbulence in financial markets and the large increase in interest rates since the Federal Reserve began tightening policy last year.

Banks across Wall Street are struggling to offload billions of dollars in debt tied to private equity takeovers, limiting their willingness to write large new loans. The backlog has gummed up the pipeline for newer deals, and dealmakers have warned the higher cost of debt has diminished the appeal of many transactions for leveraged buyout shops.

Apollo and a representative for Claure declined to comment.

Apollo’s interest in Millicom underscores the investment group’s appetite to invest in the communications sector, where it has spent heavily in recent years.

Last year, Apollo paid $7.5bn to buy a unit from communications group Lumen Technologies. The division, renamed Brightspeed, provides telephone and broadband services to more than 6mn customers in the US.

That deal became one of the high-profile takeovers that banks struggled to finance last year. Underwriters ultimately lent Apollo $3.9bn themselves after failing to find creditors that were willing to lend to the business.

Claure also has plenty of experience in the telecoms 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 then served as chief executive of US mobile group Sprint in a turnround effort that helped earn him a place inside the inner circle of SoftBank head Masayoshi Son. Claure was the Japanese group’s chief operating officer until his departure last year following a fallout with Son.

Millicom is based in Luxembourg but operates predominantly in Latin America under its Tigo brand for mobile and cable services, serving about 50mn customers. The company, led by chief executive Mauricio Ramos, also partnered with Visa last year for its Tigo Money digital payments product.

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

At the close of trading on Tuesday, Millicom’s share price was down more than 20 per cent over the past 12 months, leaving it with a market capitalisation of about $2.5bn. The company has a dual listing on exchanges in New York and Stockholm.

Millicom’s stock has been hit by the weak Colombian peso and concerns around the company burning through cash during the first nine months of 2022. A difficult macro environment and high inflation have raised questions about the group’s ability to hit a three-year target for equity-free cash flow.

Millicom was the most discounted telecom stock in Latin America as judged by its enterprise value against its operating free cash flow, according to a research by JPMorgan in November.

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