Internet company builder Rocket Internet is to sell shares in its Latin American and African holding companies to emerging markets telecoms group Millicom, with the price tag for the first 50 per cent of those businesses set at €340 million.
The deal, announced today by Millicom, will give Millicom the option, over a four year period, of acquiring a controlling stake in two Rocket Internet subsidiaries, Latin America Internet Holding (LIH) and Africa Internet Holding (AIH).
LIH and AIH together control eight businesses – including Airu, YepDoc and Kanui in Brazil – with combined expected revenue of about €35m in 2012. The two holding companies are required to launch several new businesses in the next three years, and, according to Millicom, are expected to post accumulated startup losses of under €250m for their first three years of operation.
The close of the deal announced today will see Millicom acquire a 20 per cent stake in both LIH and AIH. If it chooses to, it can acquire up to 50 per cent over the next two years, though without gaining management rights. The price tag for that first 50 per cent will be €340m.
Millicom will also have the option to acquire 100 per cent, and take full control, of both LIH and AIH at fair market value up until September 2016.
“In the same way as we have brought affordable mobile telephony services to emerging markets customers, with today’s deal, we will bring e-commerce and online services to people in Latin America and Africa,” Millicom’s President and CEO Mikael Grahne (right) said.
“This investment is fully in line with our objective to strike the right balance between growth and returns. The fact that we invest gradually and that we are partnering with proven experts in the online industry should facilitate speed of execution and likelihood of success while limiting risks.”
What does the deal mean for Rocket?
Millicom will not be the only party to limit its risks with this transaction. The Rocket Internet portfolio spans over 100 startups in 40 countries, which takes a lot of cash to fuel and comes with plenty of attached risk. In Nigeria, for example, the opening of Rocket Internet’s Kasuwa follows the closure of similar online retailer Kalahari, which shut down citing a lack of profitability after just two years of operation.
As German news site Gruenderszene points out, Rocket Internet’s Oliver Samwer has been doing the fundraising rounds of late, most recently raising $200 million from Access Industries’ billionaire Len Blavatnik. The new partnership will bring in significant cash from Rocket Internet’s own portfolio. Rocket is expected to receive €85m in Q4 2012 – the first of several installments, if Millicom acquires that first 50 per cent stake for €340m.
It could be described as a bit of a “friendly” deal. Rocket Internet, the Berlin-headquartered incubator of brothers Alexander, Marc and Oliver Samwer, is 25 per cent owned by Swedish investment bank Kinnevik, which also owns 36.9 per cent of Millicom. Kinnevik just committed an additional €124m to Rocket, bringing its total investment in Rocket to an estimated €830m.
Millicom, which runs mobile telephony operations in 13 countries in Latin America and Africa, has reportedly been struggling to find suitable acquisition targets for a while now – instead settling for extra dividends to shareholders and share buy-backs. Sounds like this is a deal that suits all three.
For related reading, check out:
Access Industries’ billionaire Len Blavatnik sinks $200m into Rocket Internet
Revealed: the Harvard grad tipped to lead Rocket Internet’s operations in Nigeria
Biggest financing rounds of 2012 so far: 10 German startups with multi-million deals