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Apollo and Claure in talks for $10bn Millicom takeover bid

Private Equity firm Apollo Global Management, alongside former SoftBank CEO Marcelo Claure, has confirmed to be in talks with Millicom International Cellular for the sale of all its outstanding shares. Apollo and Claure are considering an offer of around $19 per share, which would value the company at about $10bn, including debt. “There is no certainty that a transaction will materialize nor as to the terms, timing or form of any potential transaction,” Millicom said.

Milicom, which is headquartered in Luxembourg, primarily conducts its business in Latin America using the Tigo brand to offer mobile and cable services, serving about 50mn customers. The company is led by CEO Mauricio Ramos and recently collaborated with Visa to introduce its Tigo Money digital payments offering. It has been undertaking a strategic shift by focusing on its Central and South American operations and gradually withdrawing from its African markets.

Apollo has shown increasing interest in investing in the communications sector in recent years, notably the $7.5bn deal to buy a unit of Lumen Technologies. The renamed company, Brightspeed, provides telephone and broadband services to over 6mn customers in the US. Claure is also a seasoned professional in the telecoms sector, having founded Brightstar, a mobile phone distributor, in the late 1990s.

Apollo and Claure are attempting to structure their bid in a way that would enable them to avoid repaying or refinancing approximately $6.9bn of Millicom’s current debts, due to the volatility in financial markets and the significant rise in interest rates since last year’s policy changes. “The transaction could possibly be strictly an asset sale instead of a share sale. Also, there may be a struggle to fully finance the deal. With the cost of debt rising with interest rate hikes, debt capital lenders are becoming increasingly strict with what deals they lend to and so it could be a possible barrier to the optimal outcome,” our market analyst, Scott Rowledge, commented.

Millicom’s shares closed at $14.83 on Tuesday, 24th January. The price increased by 23% the next day after the potential deal was first reported by the Financial Times. In November 2022, according to JPMorgan, Millicom was considered to be the most discounted telecom stock in Latin America, as measured by its enterprise value in comparison to its operating free cash flow.

Written by: Quynh Chi Le

Sources: Financial Times, Total Telecom

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