Millicom buys in further to Rocket Internet landgrab in South America and Africa

taxi Brazil
taxi Brazil

taxi Brazil

Everything’s going to plan as emerging markets telco giant Millicom ups its stake in Rocket Internet‘s South American and African holding companies from 20 to 35 per cent.

Millicom is more than just an investor in Rocket’s Latin America Internet Holding (LIH) and Africa Internet Holding (AIH) – it’s a possible future owner. This week’s news is part of a deal that will see Millicom pay €340m, in three instalments, for a 50 per cent share of LIH and AIH by September 2014. It holds the option to go to 100 per cent at fair market value by September 2016.

At the time of the deal, in late August last year, LIH and AIH together held eight online businesses with combined expected revenue of €35m in 2012. By the end of 2012, Millicom expected to have put an initial €85m into LIH and AIH.

Rocket Internet, founded by Germany’s Samwer brothers, spans over over 50 portfolio companies in 40 markets. It’s known for aggressive expansion and large-scale eCommerce ventures, including copycats of Amazon, eBay and Zappos.

The plan: small local retailers to online mega malls

Millicom and Rocket Internet want to transform the retail landscape in emerging markets from small local retailers to online mega malls. As this week’s press release from Millicom puts it:

In Africa, in particular, the retail industry could be transformed in one leap from provision by small local retailers to mass-market eCommerce, offering customers new and simple access to goods and services.

Our operation Jumia, which only started selling general merchandise and fashion in Nigeria, Morocco, and Egypt in the second quarter of 2012, has already secured leading positions and demonstrated its potential to deliver growth and profitability. In Nigeria, which was in 2012 the largest African market by internet users, Jumia was the top eCommerce website.

According to Millicom’s results for 2012, sports goods retailer Kanui is the “most successful” LIH company followed by children’s goods retailer Tricae, both in Brazil.

Dafiti, Rocket Internet’s flagship online fashion retailer in Brazil, is not part of the Millicom deal – it’s held by a different holding company, Bigfoot. That structure will probably come in handy if rumours of a pending IPO check out.

The Millicom report says overall growth in 2012 was slightly slower than expected due to launch delays. But, in this week’s statement, Millicom CEO Hans-Holger Albrecht said the joint ventures have achieved leading positions “sooner than we thought” with opportunities “even greater than when we first decided to invest”.

New funding – €20m for Jumia from Summit Partners

Rocket Internet isn’t relying on Millicom to bankroll its operations in emerging markets – as just announced today, Summit Partners is putting €20m into Jumia, following investments in a string of other Rocket companies including Zando, Linio and Lazada.

Other regular recent investors in Rocket Internet include Swedish bank Kinnevik (also Millicom’s largest shareholder), German retail giant Tengelmann and JP Morgan. 

Image credit:
taxi in Brazil: flickr user Ben Tavener 


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