LAN Launches Share Swap To Take Over TAM

May 10, 2012

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Chile's LAN Airlines said it had launched a share swap offer in the final stage of its takeover of Brazil’s TAM to create LATAM Airlines Group, the largest carrier in Latin America and one of the world's biggest airlines.

The share swap offer started after the US Securities and Exchange Commission approved it earlier in the day. Brazil's regulator gave its stamp of approval on Monday.

"This marks the final stage in the merger of LAN and TAM," LAN said in a filing with the Chilean securities regulator, adding the swap offer is due for completion on June 12.

The tie-up will create an airline with annual revenue of USD$10.4 billion, based on 2010 figures. When the merger plan was announced in August, the all-stock transaction was worth an estimated USD$2.7 billion.

Chile's supreme court last month rejected appeals by LAN and TAM to lift conditions imposed on the merger by a local antitrust regulator. In October, the airlines said they did not expect those conditions to cut more than USD$10 million from savings, which were initially estimated at around USD$400 million.

The merger could result in a higher-than-expected increase in pre-tax operational revenues of up to USD$700 million for the new carrier LATAM, TAM said in a securities filing in January.

One of the few investment grade airlines in the world, LAN has domestic passenger operations in Argentina, Colombia, Chile, Ecuador and Peru and cargo operations in the same nations plus Brazil and Mexico.

LAN's first quarter net profit is expected to fall 22.3 percent on the year, as rising fuel prices and restructuring costs in Colombia are seen cutting into the carrier's bottom line despite higher sales, according to analysts polled last month.