Niel can be less stingy to fulfil his salsa dream
30/05/2024 09:48
(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.
Follow @pierrebri on X
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.
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Graphic: Millicom has outperformed Latin American peers https://reut.rs/4aDgmGg
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(Editing by Lisa Jucca and Oliver Taslic)
((For previous columns by the author, Reuters customers can
click on BRIANCON/
pierre.briancon@thomsonreuters.com; Reuters Messaging:
pierre.briancon.thomsonreuters.com@reuters.net))