TAM Shareholders OK LAN Takeover Swap Ratio

January 3, 2012

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Shareholders of Brazilian airline TAM agreed to the terms of a stock swap central to a takeover by Chilean rival LAN Airlines that would form Latin America's biggest airline.

TAM said shareholders representing 14.95 percent of stock in circulation unanimously accepted a valuation of the company indicating each of their shares was worth 0.9 shares of LAN, according to a Tuesday regulatory filing.

"This is another important step in the process of merging the two companies to create LATAM Airlines Group," TAM said in the filing, adding that the new company should be formed by the end of the first quarter.

LAN's and TAM's revenue exceeded USD$10 billion in 2010 and their combined market capitalisation is second only to Air China among the world's airlines.

In Brazil, the new company will face increased competition from Gol, which grabbed first place in the domestic market for the first time last year.

Gol announced a strategic alliance with Delta Air Lines last month, offering a 3 percent stake and a seat on its board to the US carrier for a USD$100 million investment as they expanded a code-sharing agreement.

Higher fuel costs and a glut of new capacity challenged Brazil's airlines last year, driving a wave of consolidation as congested airports and cooling customer demand began to drag on air traffic growth.

(Reuters)