Author Topic: LILA - Liberty Global Latin America tracker  (Read 123013 times)

maybe4less

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Re: LILA - Liberty Global Latin America tracker
« Reply #360 on: July 19, 2019, 10:59:38 PM »
https://www.reuters.com/article/us-at-t-divestiture-puertorico-idUSKCN1UD30O

Any opinions on how this might play out vis-a-vis LILA?

Seems like LILA is the only realistic acquirer. Unlikely one of the other three mobile operators on the island would be allowed to buy this and LILA is the only other company who could get synergies. Potentially PE might be interested, but they would have to pay a really dumb price to outbid LILA.

My guess is this dynamic allows LILA to pay an attractive price if they buy it. The AT&T team seems to have a mandate to "just sell something," so they may not be that price sensitive.

The mention of private equity firms in the article suggests to me that LILA might be looking at financing this with a PE firm like Searchlight. Searchlight and LILA could form a JV to buy this since it would be a pretty big acquisition for LILA alone.



Spekulatius

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Re: LILA - Liberty Global Latin America tracker
« Reply #361 on: July 20, 2019, 05:29:16 AM »
https://www.reuters.com/article/us-at-t-divestiture-puertorico-idUSKCN1UD30O

Any opinions on how this might play out vis-a-vis LILA?

Seems like LILA is the only realistic acquirer. Unlikely one of the other three mobile operators on the island would be allowed to buy this and LILA is the only other company who could get synergies. Potentially PE might be interested, but they would have to pay a really dumb price to outbid LILA.

My guess is this dynamic allows LILA to pay an attractive price if they buy it. The AT&T team seems to have a mandate to "just sell something," so they may not be that price sensitive.

The mention of private equity firms in the article suggests to me that LILA might be looking at financing this with a PE firm like Searchlight. Searchlight and LILA could form a JV to buy this since it would be a pretty big acquisition for LILA alone.

I don’t think Lila is the likely acquirer here. The price for ATT’s assets imply a valuation of 10x EBITDA while LILA trades at ~7x EBITDA. Even with synergies, LILA can not compete. I think there will be plenty of acquirers for cash generating assets like ATT’s. Also, LILA may have trouble with Antitrust, because they own already cable assets in Puerto Rico. My bet would be on private equity or a infrastructure investor like Brookfield.
To be a realist, one has to believe in miracles.

maybe4less

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Re: LILA - Liberty Global Latin America tracker
« Reply #362 on: July 22, 2019, 10:59:18 AM »
https://www.reuters.com/article/us-at-t-divestiture-puertorico-idUSKCN1UD30O

Any opinions on how this might play out vis-a-vis LILA?

Seems like LILA is the only realistic acquirer. Unlikely one of the other three mobile operators on the island would be allowed to buy this and LILA is the only other company who could get synergies. Potentially PE might be interested, but they would have to pay a really dumb price to outbid LILA.

My guess is this dynamic allows LILA to pay an attractive price if they buy it. The AT&T team seems to have a mandate to "just sell something," so they may not be that price sensitive.

The mention of private equity firms in the article suggests to me that LILA might be looking at financing this with a PE firm like Searchlight. Searchlight and LILA could form a JV to buy this since it would be a pretty big acquisition for LILA alone.

I donít think Lila is the likely acquirer here. The price for ATTís assets imply a valuation of 10x EBITDA while LILA trades at ~7x EBITDA. Even with synergies, LILA can not compete. I think there will be plenty of acquirers for cash generating assets like ATTís. Also, LILA may have trouble with Antitrust, because they own already cable assets in Puerto Rico. My bet would be on private equity or a infrastructure investor like Brookfield.

Agreed that it seems like a high price for LILA to pay. It occurs to me that that trailing EBITDA number at ATT might be depressed due to Hurricane Maria. In which case, $3B might not be such a high valuation.

It may also be that no one is actually going to pay that price and the price might be lower. But as I said before, unless a PE firm wants to pay a dumb price, I would expect LILA to be able to get this asset for an attractive price (assuming anti-trust allows it). Mobile is a pretty terrible business and there are 3 other operators on the island. This isn't some stable infrastructure asset. Nonetheless, PE may very well want to pay a dumb price.

FWIW, when asked if ATT's asset was attractive at all to LILA or if they didn't want anything to do with it, IR at LILA said that they can't comment.

meiroy

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Re: LILA - Liberty Global Latin America tracker
« Reply #363 on: August 07, 2019, 08:01:05 AM »

hmm Q2 is not a complete shit for a change.   

maybe4less

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Re: LILA - Liberty Global Latin America tracker
« Reply #364 on: August 07, 2019, 09:18:19 AM »

hmm Q2 is not a complete shit for a change.

I think this understates how positive this report was. Rebased OCF grew at 8% and importantly C&W showed good OCF growth (3%). They seemed to have stopped the bleeding in mobile subs with a second quarter of growth. FCF guidance was raised based on lower capex intensity and Puerto Rico is back to where it was pre-hurricane.

If you back into their confirmed OCF guidance, we should expect continued strong OCF growth at all segments in the second half (including something like 6% at CWC), especially when you adjust for the insurance/FCC proceeds received last year in Puerto Rico.

CWC growing OCF  I think is potentially a very big deal for the stock price.

Spekulatius

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Re: LILA - Liberty Global Latin America tracker
« Reply #365 on: August 07, 2019, 12:15:20 PM »
Funny how they fail to mention in their press release and IR presentation that their share count is up 6% YoY, which makes the growth in cash flow of 8% much less impressive. I do acknowledge that they finally turned a bit FCF positive.

It a crappy business that has become a bit less crappy.
To be a realist, one has to believe in miracles.

maybe4less

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Re: LILA - Liberty Global Latin America tracker
« Reply #366 on: August 07, 2019, 01:06:33 PM »
Funny how they fail to mention in their press release and IR presentation that their share count is up 6% YoY, which makes the growth in cash flow of 8% much less impressive. I do acknowledge that they finally turned a bit FCF positive.

It a crappy business that has become a bit less crappy.


Yeah, they bought the 40% of Puerto Rico they didn't own in October for 9.5M shares. It's not like they just issued them to management. I don't really see how that makes the cash flow growth less impressive.

The business doesn't have to be that great for the stock to work out very well. Persistent 5% OCF growth and we are talking huge returns.

The bottom line for me is that C&W was clearly a worse asset than they thought when they purchased it and it's taken a lot of work to turn it around. But they have largely done it and I don't think the stock price reflects that currently.

meiroy

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Re: LILA - Liberty Global Latin America tracker
« Reply #367 on: August 07, 2019, 05:12:12 PM »

Right, so, you follow this situation, waiting to see if it settles down and they start to turn around and then you start a position. But, what bothers me is like you said they did a lousy capital allocation and shareholders had to pay for it.  Did they change management? Will these guys make similar capital allocations where shareholders have to foot the bill?

maybe4less

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Re: LILA - Liberty Global Latin America tracker
« Reply #368 on: August 08, 2019, 10:22:55 AM »

Right, so, you follow this situation, waiting to see if it settles down and they start to turn around and then you start a position. But, what bothers me is like you said they did a lousy capital allocation and shareholders had to pay for it.  Did they change management? Will these guys make similar capital allocations where shareholders have to foot the bill?

The do have have a new CEO, who seems way better than Mike Fries IMO. Since he's been in charge they've made 3 acquisitions and all of them have seemed pretty good.

They clearly made a mistake with C&W. I think C&W made things look better than they were and UK disclosure laws hampered due diligence efforts by Liberty. And there may have been some pressure to do the deal since Malone was on the other side.

But that is one mistake in a long history of good deals. Malone's capital allocation is legendary and, despite all the problems in Europe, Fries has a good track record of asset sales and purchases.

Of all the things I worry about here, capital allocation and the prospect of another C&W is not one of them.

rogermunibond

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Re: LILA - Liberty Global Latin America tracker
« Reply #369 on: August 08, 2019, 11:44:40 AM »
Plus LILA and Millicom keep circling each other.  Talk, can't decide on price/leadership and then break off.

Eventually.