Independent committee of Millicom (Tigo) board believes anticipated takeover offer by Atlas at a price of US$24 per share would significantly undervalue Millicom in light of expected financial performance
A committee of independent directors from Millicom's (Tigo) board has evaluated an anticipated all-cash tender offer by Atlas Luxco at $24 per share for all outstanding shares and SDRs in Millicom that Atlas does not already own. The committee believes this offer undervalues Millicom, citing a review of expected financial performance. Preliminary estimates for 2024 indicate Millicom's Equity Free Cash Flow (EFCF) will exceed $600 million, excluding $46 million from a Colombia tower sale. Additionally, leverage is projected to reach a target of 2.5x.
The committee has entered exclusive negotiations for a sale and leaseback of a significant portion of Millicom's tower portfolio. Any formal recommendation regarding the tender offer will align with Swedish Takeover Rules. Advising the committee are Goldman Sachs, Morgan Stanley, Davis Polk & Wardwell LLP, and others.
- Millicom's projected 2024 Equity Free Cash Flow (EFCF) expected to exceed $600 million.
- Leverage predicted to reach target of 2.5x by end of 2024.
- Exclusive negotiations for sale and leaseback of a large portion of tower portfolio.
- Atlas's $24 per share tender offer deemed to significantly undervalue Millicom.
Insights
Millicom's independent committee has indicated that the anticipated $24 per share offer from Atlas significantly undervalues the company. This assertion is based on Millicom's projected financial performance for 2024, where the company expects an Equity Free Cash Flow (EFCF) above
From a financial perspective, this is significant as the projected EFCF suggests strong cash generation capabilities, which are important for both paying down debt and funding future growth initiatives. A leverage ratio near 2.5x indicates that Millicom is managing its debt levels effectively, which is generally viewed positively by investors and credit rating agencies.
Investors should note that the independent committee's position suggests confidence in the company's ongoing strategic initiatives, such as the anticipated tower sale and leaseback, which can further bolster cash flow. However, the offer from Atlas may still generate interest, given the all-cash nature, providing immediate liquidity to shareholders.
Retail investors must weigh the immediate benefit of a cash offer against the potential for higher long-term gains if Millicom's financial projections hold true.
The market dynamics here suggest that the independent committee is likely betting on future growth and undervaluation by the current offer. The telecommunications sector is capital-intensive but also poised for growth, especially in emerging markets where Millicom operates. This optimism is reflected in the committee's statement, underpinned by robust EFCF projections and the strategic sale of tower assets.
It's critical to consider the broader market context, such as the potential for growth in digital services and mobile connectivity in these regions, where Millicom has a significant presence. Investors should be cautious, however, as these growth projections depend heavily on market conditions and execution risks.
An all-cash offer provides immediate security, but holding out for a potentially higher value takes into account substantial future gains from strategic initiatives and market expansion, which might appeal to long-term investors.
Independent committee of Millicom (Tigo) board believes anticipated takeover offer by Atlas at a price of US
Luxembourg, June 27, 2024 – A committee of independent members of the Board of Directors of Millicom International Cellular S.A. (“Millicom”) confirms that it has been in communication with one of Millicom’s shareholders, Atlas Luxco S.à r.l and its affiliates (“Atlas”), regarding the anticipated all-cash tender offer by Atlas for all outstanding shares and SDRs in Millicom which Atlas does not currently own at a price of US
Following deliberation, and after discussions with Millicom’s financial advisors, the independent committee unanimously believes and has informed Atlas that a
In light of the anticipated tender offer, and to support Millicom’s shareholders in evaluating such tender offer, based on Millicom’s preliminary review of financial performance for the second quarter of 2024 (which continues to be subject to review by Millicom’s management and auditor), the committee expects that:
- Millicom’s Equity Free Cash Flow (EFCF)1 for full year 2024 will be above
$600 million . This expectation reflects results through mid-June and takes into account potential risks that may impact performance. This expectation does not include$46 million of net proceeds Millicom already received from its previously announced Colombia tower sale. - Millicom’s Leverage1 will end 2024 near the intermediate term target of 2.5x.
The above expectation also excludes proceeds that may be obtained from any future tower monetization. Millicom has entered into exclusive negotiations regarding a sale and leaseback of a large portion of its tower portfolio.2
The independent committee will carefully review any information disclosed by Atlas in connection with its anticipated tender offer and will issue the committee’s formal recommendation to Millicom’s shareholders in accordance with the Swedish Takeover Rules and other applicable requirements in case such tender offer is made.
Advisors
The independent committee is receiving financial advice from Goldman Sachs International and Morgan Stanley & Co. International plc and legal advice from Davis Polk & Wardwell LLP and Nord Advokater and Advokatfirman Lindahl.
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For further information, please contact:
| Press: | Investors: |
| Sofia Corral, Director Corporate Communications press@millicom.com | Michel Morin, VP Investor Relations investors@millicom.com |
Regulatory Statement
Certain of this information was, prior to this release, inside information and is information that Millicom is obliged to make public pursuant to the EU Market Abuse Regulation. This information was submitted for publication, through the agency of the contact person set out above, at 23:15 CET on June 27, 2024.
About Millicom
Millicom (NASDAQ U.S.: TIGO, Nasdaq Stockholm: TIGO_SDB) is a leading provider of fixed and mobile
telecommunications services in Latin America. Through our TIGO® and Tigo Business® brands, we provide a wide range of digital services and products, including TIGO Money for mobile financial services, TIGO Sports for local entertainment, TIGO ONEtv for pay TV, high-speed data, voice, and business-to-business solutions such as cloud and security. As of March 31, 2024, Millicom, including its Honduras Joint Venture, employed approximately 15,500 people, and provided mobile and fiber-cable services through its digital highways to more than 45 million customers, with a fiber-cable footprint over 14 million homes passed. Founded in 1990, Millicom International Cellular S.A. is headquartered in Luxembourg.
1 EFCF and Leverage are non-IFRS metrics. Please refer to Millicom’s 2023 Annual Report for a description of non-IFRS measures.
2 At this stage, it is not possible to say that a transaction is likely to materialize, nor to make any statement on the terms, timing or form of any potential transaction.
Forward-Looking Statements
Statements included herein that are not historical facts, including without limitation statements concerning future strategy, plans, objectives, expectations and intentions, projected financial results, liquidity, growth and prospects, are forward-looking statements. Such forward-looking statements involve a number of risks and uncertainties and are subject to change at any time. In the event such risks or uncertainties materialize, Millicom’s results could be materially adversely affected. In particular, there is uncertainty about global economic activity and inflation, the demand for Millicom's products and services, and global supply chains. The risks and uncertainties include, but are not limited to, the following:
global economic conditions, foreign exchange rate fluctuations and high inflation, as well as local economic conditions in the markets we serve, which can be impacted by geopolitical developments outside of our principal geographic markets, such as the armed conflict between Russia and the Ukraine and related sanctions;
potential disruption due to diseases, pandemics, political events, armed conflict, acts by terrorists, including the impact of the COVID-19 virus and the ongoing efforts throughout the world to contain it;
telecommunications usage levels, including traffic, customer growth and the accelerated transition from traditional to digital services;
- competitive forces, including pricing pressures, piracy, the ability to connect to other operators’ networks and our ability to retain market share in the face of competition from existing and new market entrants as well as industry consolidation;
- the achievement of our operational goals, environmental, social and governance targets, financial targets and strategic plans, including the acceleration of cash flow growth, the expansion of our fixed broadband network, the reintroduction of a share repurchase program and the reduction in net leverage;
- legal or regulatory developments and changes, or changes in governmental policy, including with respect to the availability and terms and conditions of spectrum and licenses, the level of tariffs, laws and regulations which require the provision of services to customers without charging, tax matters, controls or limits on the purchase of U.S. dollars, the terms of interconnection, customer access and international settlement arrangements;
- our ability to grow our mobile financial services business in our Latin American markets;
- adverse legal or regulatory disputes or proceedings;
- the success of our business, operating and financing initiatives and strategies, including partnerships and capital expenditure plans;
- our expectations regarding the growth in fixed broadband penetration rates and the return that our investment in broadband networks will yield;
- the level and timing of the growth and profitability of new initiatives, start-up costs associated with entering new markets, the successful deployment of new systems and applications to support new initiatives;
- our ability to create new organizational structures for the Tigo Money and Towers businesses and manage them independently to enhance their value;
- relationships with key suppliers and costs of handsets and other equipment;
- disruptions in our supply chain due to economic and political instability, the outbreak of war or other hostilities, public health emergencies, natural disasters and general business conditions;
- our ability to successfully pursue acquisitions, investments or merger opportunities, integrate any acquired businesses in a timely and cost-effective manner, divest or restructure assets and businesses, and achieve the expected benefits of such transactions;
- the availability, terms and use of capital, the impact of regulatory and competitive developments on capital outlays, the ability to achieve cost savings and realize productivity improvements;
- technological development and evolving industry standards, including challenges in meeting customer demand for new technology and the cost of upgrading existing infrastructure;
- cybersecurity threats, a security breach or other significant disruption of our IT systems or those of our business partners, suppliers or customers;
- the capacity to upstream cash generated in operations through dividends, royalties, management fees and repayment of shareholder loans; and
- other factors or trends affecting our financial condition or results of operations.
A further list and description of risks, uncertainties and other matters can be found in Millicom’s Registration Statement on Form 20-F, including those risks outlined in “Item 3. Key Information—D. Risk Factors,” and in Millicom’s subsequent U.S. Securities and Exchange Commission filings, all of which are available at www.sec.gov. All forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by this cautionary statement. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof. Except to the extent otherwise required by applicable law, we do not undertake any obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.
Non-IFRS Measures
This press release contains financial measures not prepared in accordance with IFRS. These measures are referred to as “non-IFRS” measures and include: non-IFRS service revenue, non-IFRS EBITDA, and non-IFRS Capex, among others. The non-IFRS financial measures are presented in this press release as Millicom’s management believes they provide investors with an additional information for the analysis of Millicom’s results of operations, particularly in evaluating performance from one period to another. Millicom’s management uses non-IFRS financial measures to make operating decisions, as they facilitate additional internal comparisons of Millicom’s performance to historical results and to competitors' results, and provides them to investors as a supplement to Millicom’s reported results to provide additional insight into Millicom’s operating performance. Millicom’s Remuneration Committee uses certain non-IFRS measures when assessing the performance and compensation of employees, including Millicom’s executive directors.
The non-IFRS financial measures used by Millicom may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies - refer to the section “Non-IFRS Financial Measure Descriptions” for additional information. In addition, these non-IFRS measures should not be considered in isolation as a substitute for, or as superior to, financial measures calculated in accordance with IFRS, and Millicom’s financial results calculated in accordance with IFRS and reconciliations to those financial statements should be carefully evaluated.
Non-IFRS Financial Measure Descriptions
Service revenue is revenue related to the provision of ongoing services such as monthly subscription fees for mobile and broadband, airtime and data usage fees, interconnection fees, roaming fees, mobile finance service commissions and fees from other telecommunications services such as data services, short message services, installation fees and other value-added services excluding telephone and equipment sales.
EBITDA is operating profit excluding impairment losses, depreciation and amortization, and gains/losses on fixed asset disposals.
EBITDA after Leases (EBITDAaL) represents EBITDA after lease interest expense and depreciation charge.
EBITDA Margin represents EBITDA in relation to Revenue.
Organic growth represents year-on-year growth excluding the impact of changes in FX rates, perimeter, and accounting. Changes in perimeter are the result of acquisitions and divestitures. Results from divested assets are immediately removed from both periods, whereas the results from acquired assets are included in both periods at the beginning (January 1) of the first full calendar year of ownership.
Net debt is Debt and financial liabilities, including derivative instruments (assets and liabilities), less cash and pledged and time deposits.
Leverage is the ratio of net debt over LTM (Last twelve month) EBITDAaL, proforma for acquisitions made during the last twelve months.
Capex is balance sheet capital expenditure excluding spectrum and license costs and lease capitalizations.
Cash Capex represents the cash spent in relation to capital expenditure, excluding spectrum and licenses costs.
Operating Cash Flow (OCF) is EBITDA less Capex.
Operating Free Cash Flow (OFCF) is EBITDA, less cash capex, less spectrum paid, working capital and other non-cash items, and taxes paid.
Equity Free Cash Flow (EFCF) is OFCF less finance charges paid (net), lease interest payments, lease principal repayments, and advances for dividends to non-controlling interests, plus cash repatriation from joint ventures and associates.
Operating Profit After Tax displays the profit generated from the operations of the company after statutory taxes.
Return on Invested Capital (ROIC) is used to assess the Group’s efficiency at allocating the capital under its control to and is defined as Operating Profit After Tax divided by the average invested Capital during the period.
Average Invested Capital is the capital invested in the company operation throughout the year and is calculated with the average of opening and closing balances of the total assets minus current liabilities (excluding debt, joint ventures, accrued interests, deferred and current tax, cash as well as investments and non-controlling interests), less assets and liabilities held for sale.
Average Revenue per User per Month (ARPU) for our Mobile customers is (x) the total mobile and mobile financial services revenue (excluding revenue earned from tower rentals, call center, data and mobile virtual network operator, visitor roaming, national third parties roaming and mobile telephone equipment sales revenue) for the period, divided by (y) the average number of mobile subscribers for the period, divided by (z) the number of months in the period. We define ARPU for our Home customers as (x) the total Home revenue (excluding equipment sales and TV advertising) for the period, divided by (y) the average number of customer relationships for the period, divided by (z) the number of months in the period. ARPU is not subject to a standard industry definition and our definition of ARPU may be different from other industry participants.
Please refer to our 2023 Annual Report for a list and description of non-IFRS measures.
Other Disclaimers
Morgan Stanley & Co. International plc (“Morgan Stanley”) and Goldman Sachs International (“Goldman Sachs”) are acting as financial advisors to Millicom and to no one else. Morgan Stanley and Goldman Sachs are authorised by the Prudential Regulation Authority (“PRA”) and regulated by the Financial Conduct Authority and the PRA. In connection with such matters, Morgan Stanley’s and Goldman Sachs’ and their respective affiliates’ respective directors, officers, employees and agents will not regard any other person as its client, nor will Morgan Stanley or Goldman Sachs be responsible to anyone other than Millicom for providing the protections afforded to their clients or for providing advice in connection with the matters described in this announcement or any matter referred to herein.
FAQ
What is the anticipated offer price per share in Atlas's tender offer for TIGO?
Why does Millicom's independent committee believe the $24 offer undervalues TIGO?
What is Millicom's projected Equity Free Cash Flow (EFCF) for 2024?
What is Millicom's leverage target by the end of 2024?
What major transaction is Millicom currently negotiating?
