EMP Latin America Announces Sale of Remaining Stake in Axtel

06/03/2008

Author:
EMP Latin American Management LLC
Washington, DC
United States

Categories:
Private Equity

Preview:
Investment in the Mexican Telecom Provider Yields Attractive Gain

Article:
Washington D.C., May 6, 2008 -- EMP Latin American Management LLC (“EMP Latin America”) announced today that the AIG-GE Capital Latin American Infrastructure Fund L.P. (“LAIF” or “the Fund”) has fully divested its remaining shareholding in Axtel S.A.B. de C.V. (“Axtel”), Mexico’s largest competitive local exchange carrier.

As part of the IPO in late 2005, LAIF had already sold roughly half of its initial 15% participation in Axtel, and during the first half of 2007 the Fund sold another third of its original shareholding. Recent transactions were done through direct market sales, as increased trading volume allowed for a fluid exit. Total sales proceeds resulted in a healthy money multiple and attractive overall returns on the entire investment.

In November 1997, EMP Global’s Latin American team participated in the start-up of Axtel, a greenfield company that was awarded a national concession to provide local and long distance telecommunications services in competition with former monopoly telecom provider, Telmex. Axtel provides voice telephony, data, internet and bundled services using a hybrid local access network based mainly on wireless local loop technology.

Axtel’s network has quickly expanded and currently covers twenty seven cities, including the largest metropolitan areas in Mexico, which represent roughly 50% of the total population. The acquisition of competitor Avantel in late 2006 has resulted in expected synergies, strengthened Axtel’s position in the corporate segment, and has widened its network coverage. As a result, Axtel’s CPO share price has appreciated by more than 120% since the IPO in December 2005.

James F. Martin, Managing Partner of EMP Latin America said:

“Axtel faced many obstacles during its early years of growth, but we supported Axtel throughout a critical financial restructuring in early 2003, based on a strong belief in the fundamental business model of the company, as well as the talent and energy of its management. Judging from the company’s growth and strong appreciation in stock price, this belief has proven to be justified.”

Lucas de Beaufort, Senior Associate at EMP Latin America added:

“We are very pleased with the overall performance of our investment in Axtel, especially in the context of its challenging early history. During the life of the Fund, we saw the company through a number of ups and downs. In spite of strong competition, we believe that Axtel is firmly set on a path to longer-term growth, which is likely to be enhanced by the changing regulatory environment in the Mexican telecom sector.”

Since its inception in November 1996, LAIF has invested approximately US$817 million in 24 companies throughout the Latin American region, which are engaged in a variety of infrastructure sectors including telecom, transport, energy, and natural resources. This exit is part of a continuing series of recent public and private sales of LAIF’s assets.

About EMP Latin American Management LLC

EMP Latin American Management LLC, a joint venture between EMP Global LLC and the four principal members of EMP Global’s Latin American team, is the Principal Adviser to the AIG-GE Capital Latin American Infrastructure Fund L.P.