LAN/TAM Deal On Track As Rival Drops Appeal
A small Chilean airline said on Tuesday it dropped its appeal against larger rival LAN's planned takeover of Brazil's TAM, removing a major hurdle to the creation of one of the world's biggest airlines.
LAN said it reached a deal to pay smaller rival PAL USD$5 million to help cover legal costs from appeals it made to Chile's anti-monopoly regulator and the Supreme Court relating to the takeover of TAM.
The multi-billion dollar deal now needs approval from Brazilian antitrust council Cade and LAN expects the tie-up to be concluded toward the end of the first quarter of 2012.
"PAL's board adopted (the decision) to... desist in legal actions lodged with the anti-monopoly regulator TDLC and the Supreme Court," the carrier said in a statement.
LAN said PAL had asked it to cover its legal costs.
PAL appealed regulator TDLC's ruling to approve the takeover with conditions earlier this month. LAN and TAM have also appealed to Chile's senior court over some of the conditions imposed on their planned merger, but legal experts say the appeals do not block the tie-up process.
The measures LAN and TAM appealed relate to code-share agreements, obligations to give up some flights via Lima to other cities and surveillance requirements.
"The companies (LAN and TAM) believe the appeal process will not delay LAN and TAM's plans to conclude the (merger) transaction, which they expect to take place toward the end of the first quarter of 2012," LAN said in a statement on Tuesday, reporting its third quarter earnings.
LAN said its third-quarter profit fell 11.1 percent from a year earlier to USD$94.5 million, as high fuel prices and costs from its launch in Colombia countered strong cargo and passenger traffic growth.
LAN shares closed down 1.87 percent on Tuesday, slightly outpacing a 1.39 percent fall in Santiago's blue-chip IPSA stock index. LAN's earnings and PAL's statement were both published after the market close.
TAM shares ended 1.05 percent stronger on Tuesday, outperforming Brazil's benchmark Bovespa stock index, which shed 1.07 percent.