Through the proposed transaction the two companies will create a business with greater scale, product diversification, and a capital structure that will enable significant investment in its fixed fibre footprint expansion and maximise opportunities in 5G.
The deal combines the complementary operations of VTR, a provider of high-speed consumer fixed products, connecting close to 3 million subscribers, with Claro Chile, one of the leading telecoms service providers in the country with over 6.5 million mobile customers.
The new JV aims to surpass 6 million homes through its fixed network by 2025, with the having access to FTTH infrastructure.
In addition, the JV is expected to generate run-rate synergies of over $180 million, 80% of which are expected to be achieved three years post completion. Most of the synergies come from cost savings, driven by network and operating efficiencies resulting from the merger. The JV is also due to create additional revenue streams through cross-selling opportunities and scale.
Both LLA and AMX agreed to contribute businesses with net debt of CLP 1,095 billion ($1.5 billion) and CLP 259 billion ($0.4 billion), respectively. In addition, LLA will make a balance payment of CLP 73 billion ($0.1 billion) to AMX.
Once completed, neither LLA nor AMX will consolidate the JV with no change in control for existing debtholders of VTR. The JV will target a long-term net leverage ratio of 2.8x to 3.5x earnings before interest, taxes, depreciation and amortization (EBITDA).
Additionally, the executive leadership team of JV will be agreed before closing and will consist of four representatives from each of LLA and AMX. The role of chairperson will rotate between the shareholders with certain actions subject to the consent of both parties.
Subject to customary closing conditions, including regulatory approvals, the deal is expected to close in H2 of 2022.
The deal excludes all telecoms towers owned indirectly by AMX in Chile. Earlier this month AMX's shareholders approved a plan to spin off the company's towers business in Latin America.
Following the company's general meeting, the spin-off will create a new company called Sitio Latinoamerica which will own 36,000 telecoms towers in Argentina, Brazil, Chile, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Panama, Paraguay, Peru, Puerto Rico, Dominican Republic and Uruguay.
In addition, AMX will contribute a portion of its share capital mostly made up of shares in subsidiary companies that own tower assets and other related infrastructure.
