Niel can be less stingy to fulfil his salsa dream
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Pierre Briancon
LONDON, May 30 (Reuters Breakingviews) -Xavier Niel likes his privacy. Three years after delisting telecom operator Iliad, the French tycoon is mulling a bid for the 71% of shares he doesn’t own in Millicom TIGO.O, a Latin American telco. Atlas Investissement, Niel’s holding company, said on May 23 it is looking to shore up financing for a $24-a-share offer. That implies a tiny 2% premium over the price Millicom was trading at the day before Atlas made its intention public. Given that Millicom is profitable and growing, the bid price does not look convincing.
Millicom’s stock is up 36% this year, and the company’s shareholders already have a lot to thank Niel for. The value of their investment has doubled since he started building up his stake in September 2022, when the stock was trading at around $12. The French billionaire now has three representatives on the nine-strong board. A former Iliad top executive, Maxime Lombardini, became Millicom’s president and chief operating officer in September. His focus on profitability and cost cutting helps explain much of the steep rise of the share price in the last few months.
Taking the group private would at the very least bring simplicity to a company currently controlled by a French businessman, headquartered in Luxembourg, trading in Sweden and on the Nasdaq, and operating in nine Latin American countries from Paraguay to Guatemala.
Atlas says the mooted $24-a-share price amounts to a 19% premium over the average share price of the last three months, and 27% when calculated over six months. By sticking to his offer, Niel would have to fork out $2.9 billion to complete his bid. And in the process inherit a company with nearly $6 billion worth of debt. He may invite some private equity players to take part in the bid.
Millicom is trading around Niel’s tentative offer price, a sign that investors aren’t too hopeful the billionaire will improve his bid. Yet the offer seems to undervalue the target: Millicom currently trades at 4.2 times its expected 2025 EBITDA, according to Breakingviews calculations, compared to an average of 5.2 times for regional competitors. The Latin American group has improved its profitability, with its EBITDA margin expected to hit 43% this year from 36% a year ago, note Morningstar analysts, which have a $34 fair value estimate on the stock. Hiking the offer by 15% would raise Niel’s bill to a manageable $3.3 billion. A little gesture of goodwill might go a long way to convince Millicom investors they don’t need to wait out for future profits.
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CONTEXT NEWS
Atlas Investissement, the investment vehicle owned by French telco billionaire Xavier Niel, said on May 23 it was exploring an all-cash tender offer for the 71% of shares it doesn’t own in $4 billion Millicom, a Latin American telecom company.
Atlas added that it was currently “exploring financial options” in order to support a bid at $24 a share. Millicom shares closed at $23.58 on the Nasdaq on May 22.
Niel owns French telecom operator Iliad, which he took private in 2021.
Graphic: Millicom has outperformed Latin American peers https://reut.rs/4aDgmGg
Editing by Lisa Jucca and Oliver Taslic
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