Millicom splashes out $2.2B on Tigo Guatemala acquisition

Nasdaq-listed Millicom, through a $2.2 billion cash deal to take full control of Tigo Guatemala, has made the largest-ever foreign direct investment in the Central American country.

For its money Millicom acquires the remaining 45% equity that it doesn't own in the mobile and broadband service provider, buying out Panama-based Miffin Associates

The Luxembourg-headquartered company, which has exited Africa to focus more on Latin America, enthused about what it sees as an enormous upside from seizing full control of Tigo Guatemala (although it has needed bridge financing to fund the transaction).

Figure 1: Shopping around: Millicom is busy consolidating its position in Latin America with deals like this in Guatemala, after its Africa exit.
(Source: ton koene / Alamy Stock Photo)

According to the official announcement, Millicom expects the transaction to be "significantly and immediately accretive" to the company's cash flow and net income.

There is also an expectation that the Guatemalan move will increase Millicom's equity free cash flow by approximately $200 million before incremental financing costs.

Millicom CEO Mauricio Ramos remarked that the transaction was "right in line" with the company's "inorganic capital allocation strategy."

The strategy includes the acquisition of the remaining minority interests owned by third parties in Millicom's operations, but only, added Ramos, when those transactions "can be executed in an accretive manner."

The Guatemalan deal seems to have ticked these strategic boxes.

"With this transaction, we will transform the financial profile of Millicom, significantly increase our cash flow and net income and greatly simplify our structure," asserted Ramos.

More debt

The bridge financing is provided by what Millicom calls a "group of leading international banks".

Millicom says it 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 offering expected for Q1 2022.

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Taking all that into account, Millicom expects leverage to be approximately 3.1x in Q1 2022 and then "continue to decline thereafter" towards the company's leverage target of 2.0x.

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— Ken Wieland, contributing editor, special to Light Reading