Will telco billionaire Xavier Niel challenge Apollo?
Is a takeover battle brewing for Latin American mobile operator Millicom International?
French telecoms billionaire Xavier Niel announced on Tuesday that his holding company had raised its stake in Millicom to 19.6 per cent from 7 per cent disclosed in November.
The large minority stake could complicate the near-$10bn bid that private equity group Apollo Global and ex-SoftBank executive Marcelo Claure have been preparing, which the FT first told you about in January.
In the weeks after the FT’s report, trading volumes in Millicom soared, causing merger arbitrage analysts to question whether an incumbent shareholder was building a stake.
At least some of the buying came from Niel as he bolstered his position and muddied what’s already a complicated story for Millicom — one of the largest telecom providers in Latin America (despite being based in Luxembourg).
The company, which serves 50mn customers predominantly under its Tigo brand, has been trying to cut its heavy debt load through a corporate break-up.
Millicom is planning to spin off its cellular tower business by the end of the year after a gruelling multiyear separation plan. It’s also soliciting outside investors for its Tigo Money digital payments platform. But fast-rising interest costs and soaring regional inflation have made the operating environment increasingly precarious, battering shares. The telecom group has seen its stock fall by two-thirds since 2019.
Apollo and Claure are looking to buy all of Millicom ahead of those divestitures, sources briefed on the group’s thinking told DD. The company’s stock has already soared beyond the “high teen” price the group had wanted to pay, signalling that it may need to pay up.
Niel has filed as a passive shareholder for now and has remained tight-lipped on his ambitions for Millicom.
But the billionaire has never been one to miss out on a good opportunity. He has been buying up telecom assets for years via his holding company and Iliad, the French telecoms group he founded in 1990 that has expanded into Italy and Poland. His investment vehicle Atlas Investissement also bought a 2.5 per cent stake in Vodafone in September.
Now that Niel’s Atlas is Millicom’s biggest shareholder, DD is watching to see how it will affect the deal talks under way between Millicom, Apollo and Claure. He was already a significant shareholder when their deal began forming, underscoring that the group already knew its efforts would have to eventually win approval by large existing shareholders.
Niel’s typical playbook is to buy up telecoms groups before applying the signature low-cost model that made his fortune in France. So it wouldn’t be like him to quickly flip an asset or stake to another buyer.
Telecoms is a small world and DD wouldn’t be surprised if the bankers and other players around the table on this one happened to know each other well enough to pick up the phone.