Millicom, which operates under the Tigo brand name, and Colombian operator Empresas Publicas de Medellin (EPM), have reached an agreement on the structure and key terms for the combination of their respective mobile, TV, broadband and telephony businesses. Through the proposed combination of UNE and Tigo Colombia, EPM and Millicom expect to create a convergent operator, offering mobile, broadband at home and on the move, pay-TV and fixed services. The integrated company would have over 8.4 million connections with households and mobile customers.
On a pro forma basis, in 2012 the combined company would have had revenues of over USD 2 billion and EBITDA of USD 531 million in 2012. Free cash flow generation in 2012 would have been USD 185 million. Tigo said.
Via its merger with EPM, Tigo Colombia plans to gain scale in the pay TV market, more than doubling the number of homes receiving content and entertainment from Millicom/ Tigo. Overall for Millicom, RGUs at its Cable & Digital Media division are expected to increase from 1.1 million to 5.4 million.
The proposed transaction implies an enterprise valuation of Tigo Colombia (pre-deal) equal to USD 1.3 billion, and an enterprise valuation of UNE (pre-deal and including UNE affiliates) of USD 2.1 billion.
Tigo and EPM have identified cost and capex synergies equivalent to a net present value of over USD 600 million (after integration costs). The costs and capex savings are expected to be essentially derived from network and IT integration and procurement efficiencies. The integration costs are expected to amount to USD 105 million in the first three years following closing, of which USD 45 million in the first year.
EPM would hold a majority equity interest in the combined company, owning 50 percent and 1 share of the outstanding shares, while Tigo will own the remaining outstanding shares. Tigo will assume operational and administrative control and full consolidation of the integrated entity from closing.
The new company board of directors would be composed of seven representatives, of which four appointed by Tigo and three by EPM. EPM would have the right to appoint the chairman of the board and of the Audit Committee, while Tigo will name the management team of the combined company.
Through the merger, Millicom net debt will increase by a total consideration of around USD 1.1 billion as the new combined company will be fully consolidated by Tigo upon closing of the transaction.
The merger is scheduled for completion by the end of the first quarter of 2014.
