Millicom (Tigo) to acquire full control of Tigo Guatemala
Nov 13, 2021
Luxembourg - Millicom announced today that it has signed an agreement to acquire the remaining 45% equity interest in its joint venture businesses in Guatemala (collectively, “Tigo Guatemala”) from our local partner for $2.2 billion in cash. The transaction was signed today and is expected to close later today. As a result, Millicom will own a 100% equity interest in Tigo Guatemala. The transaction is expected to be significantly and immediately accretive to Millicom’s cash flow and net income and to increase Millicom’s equity free cash flow1 by approximately $200 million before incremental financing costs.
Bridge financing to fund the transaction is being provided by a group of leading international banks. Millicom intends to refinance the bridge with the planned issuance of approximately $1.5 billion of new long-term debt, and approximately $750 million of new equity via a rights offering2 expected for Q1 2022. Giving effect to the transaction and the planned equity offering, Millicom’s leverage1 is expected to be approximately 3.1x in Q1 2022 and to continue to decline thereafter towards the company’s leverage target of 2.0x.
With this transaction, Millicom consolidates its position as the leading telecommunication service provider in Central America.
Millicom CEO Mauricio Ramos said: “We are delighted to have signed this agreement to consolidate a 100% ownership position in Tigo Guatemala, one of our most successful businesses. The transaction is right in line with our stated inorganic capital allocation strategy, which includes the acquisition of the remaining minority interests owned by third parties in our operations, when those transactions can be executed in an accretive manner.”
“We thank our partners for their important role developing Tigo Guatemala and for the support for this transaction. For Millicom, this new investment reflects our continued confidence in the thriving economy of Guatemala and our renewed commitment to the digital transformation of its society. Hand in hand with the vision and strong commitment of our team of more than 3,100 employees in the country, we will continue to build the digital highways that connect people, improve lives, and develop communities all throughout Guatemala,” Ramos added.
He finished by saying that: “With this transaction, we will transform the financial profile of Millicom, significantly increase our cash flow and net income and greatly simplify our structure.”
About Tigo Guatemala
As of September 30, 2021, Tigo Guatemala was the leading mobile player with 11.6 million subscribers, the leading broadband internet provider with 392,000 subscribers, and the second largest pay TV provider with 567,000 customers. Tigo Guatemala is the most profitable business within the Millicom Group, with an EBITDA margin above 51%. In addition, Tigo Guatemala also owns extensive infrastructure assets, including approximately 4,400 towers, two tier 3 data centers, and more than 21,000 km of fiber.
In 2020, Tigo Guatemala revenue grew 4.8% to $1.5 billion, EBITDA rose 4.0% to $778 million, operating cash flow (“OCF”) increased 3.9% to $597 million, and equity free cash flow after leases (“EFCF”) was $360 million. Based on its robust financial and operating performance in the first nine months of 2021, Tigo Guatemala’s financial targets3 for full year 2021 are:
- Revenue of about $1.6 billion, up 6% year-over-year;
- EBITDA of $850 million, implying an EBITDA margin of 53% and growth of 9%;
- OCF (EBITDA less Capex) of $650 million, implying an OCF margin of 41% and growth of 9%;
- EFCF after leases of approximately $450 million, implying growth of 25%; and
- Net income of approximately $350 million, up 32%.
Based on Tigo Guatemala’s full year 2021 targets2, the purchase price implies the following valuation multiples: EFCF yield of around 9.0%, EV/OCF of 8.2x, and EV/EBITDA of 6.2x. As a result of the transaction, Millicom will fully consolidate Tigo Guatemala’s results and balance sheet.
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