• Iliad’s owner Xavier Niel has built a sizeable stake in Millicom
• His investment vehicle Atlas Investissement signalled last month it was exploring a takeover offer for the Latin American operator 
• With the funding now in place, Atlas has made an official offer that values Millicom at $4.1bn
• But Millicom’s board has preempted the move by saying this anticipated offer undervalues the operator 

Less than six weeks after signalling its intention to acquire Millicom, Xavier Niel’s M&A vehicle, Atlas Investissement, has tabled a takeover bid that values the Latin American operator at $4.1bn, an offer the Millicom board has already stated would “not be in the best interests of Millicom’s shareholders.” 

The official cash offer from Atlas Luxco (a subsidiary of Atlas Investissement) of $24 per Millicom share, the same price that was suggested in late May, was unveiled early on Monday morning. As Atlas Investissement already holds a 29.03% stake in Millicom, which provides mobile and fixed broadband services under the Tigo brand to more than 40 million customers across nine Latin American markets – Bolivia, Colombia, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama and Paraguay – it is essentially offering $2.9bn for the shares it doesn’t already own. According to Atlas Luxco, it is offering Millicom shareholders “compelling value… high transaction certainty… [and] a unique” opportunity to cash in on stock that has traded as low as $14.46 per share over the past year.  

Niel is a canny telecom sector entrepreneur and investor, having developed Iliad from a small alternative fixed broadband operator in France at the turn of the century into a European fixed and mobile services powerhouse. It has significant operations in France, Poland and Italy along with investments in the Republic of Ireland, Switzerland, Sweden and the Baltic states (via a near 20% stake in Tele2), and a small stake (2.5%) in Vodafone Group.   

Now he has turned his attention to Latin America, where he believes Millicom’s prudent and targeted approach (since the operator divested its operations in Africa) offers an opportunity for profitable growth and additional international scale for his telecom group. For the first quarter of this year, Millicom reported an 8.6% year-on-year increase in revenues to $1.5bn and a 24.5% increase in EBITDA to $632m. 

In its official bid announcement, Atlas Luxco noted that Millicom is “an attractive investment opportunity due to its position as a regional market leader in Latin America and its strong position in South America, its high-quality assets and strong brand. Millicom has also demonstrated a long-term commitment to the region with its significant investments, which are expected to support digital development for the relevant populations and economies as well as the achievement of its ambitious ESG targets.” 

The announcement added that if the takeover offer is successful, Atlas would “continue to support the company in the execution of its strategic plan. Specifically, Atlas wants to continue expanding the reach and capacity of Millicom’s networks and distribution capabilities to grow its customer base and better leverage its comprehensive telecom expertise. Atlas believes that the company will benefit from the purchaser group’s long-term knowledge and experience in the telecoms sector across numerous jurisdictions, as well as the creation of potential synergies that will allow Millicom to be better equipped to focus on long-term business goals, including pursuing any potential strategic transactions and acquisitions.” 

But if Niel wants to add Millicom to his empire, he may need to dig a bit deeper into his merger and acquisition warchest. 

In anticipation of the upcoming bid, the Millicom board last week issued a statement to say that a $24 per share offer “would significantly undervalue Millicom and not be in the best interests of Millicom’s shareholders. The independent committee’s belief takes into consideration, among other things, Millicom management’s latest review of financial performance,” including an expectation that “equity-free cash flow” (EFCF) will be greater than $600m for the full year, which suggests improving results for the second quarter and remainder of the year as the EFCF amounted to just $1m for the first quarter. The board also noted that additional financial gains are expected from the sale and from leaseback of most of its tower assets, and that it is currently in exclusive negotiations for such a deal. 

And it seems like shareholders are expecting a higher offer too, as Millicom’s current share price stands at $24.55, higher than the Atlas Luxco offer.   

Atlas Luxco acknowledged the Millicom board’s announcement but noted that the “last-minute communication does not contain any valuation arguments” and contains only “updated forecasts as to select features of Millicom’s results of operations for 2024, which continues to be subject to review by Millicom’s management and auditor.” 

Now Millicom’s board is obliged to issue a statement based on the official offer, but it’s hard to imagine a change of heart. There’s no guarantee that Niel will increase the offer – his M&A history shows that he has his limits and won’t overpay, something that was apparent recently when he was unsuccessful in his efforts to strike a deal that would have combined the Italian operations of Vodafone and Iliad (Vodafone rejected Iliad’s offer and struck a deal with Swiccom instead). 

So the ball is now in the Millicom board’s court and the next few months will likely tell us whether Niel has aced yet another telecom M&A deal. 

- Ray Le Maistre, Editorial Director, TelecomTV