LAN Airlines And TAM Airlines To Form Merger
January 24, 2011 - LAN Airlines And Tam Airlines TAM announced the signing of the binding agreements between both companies and their respective controlling shareholders, in line with the memorandum of understanding (the “MOU”) signed on August 13, 2010.
These binding agreements, include an Implementation
Agreement and an Exchange Offer Agreement (the “Executed
Contracts”) containing the definitive terms and
conditions of the proposed business combination of LAN
and TAM. This transaction remains subject to approval of
Agência Nacional de Aviação Civil of
The Executed Contracts were approved by the Boards of Directors
of both LAN and TAM at meetings held on January 18, 2011 in
Pursuant to the Executed Contracts and through several corporate
restructurings to be implemented in Chile and Brazil, and an
exchange offer addressed to all holders of TAM stock (other than
the Amaro family, the controllers of TAM), the new
organizational structure of the combined entity will be as shown
in the chart below, assuming all TAM shareholders (other than
the Amaro family) tender their shares into the exchange offer:
Enrique Cueto, CEO of LAN Airlines said: “We are pleased to
announce that LAN and TAM are taking a new and very important
step towards building one of the leading airline groups in the
world. Today’s announcement confirms the commitment that we
share with our friends at TAM, which is a strong passion and
determination to provide millions of Latin American passengers
with better service, always certain of the great potential of
the Latin American market.”
“As regional leaders, TAM and LAN make a natural move in the global trend of consolidation in the airline sector. We believe this is the best way to guarantee our companies’ growth, in a scenario of high competition and growing demand. We are confident that, after all the required approvals, we will be able to offer even more advantages to our costumers, employees and stockholders”, says Marco Antonio Bologna, TAM S.A.’s CEO.
Regarding the structure of the transaction, substantially all of the voting stock of TAM is expected to be acquired by a new Chilean corporation (“Holdco 1”). The share capital of Holdco 1 will be divided into two series: (i) one series of voting stock, which will have no economic rights other than nominal dividend rights, and (ii) one series of non-voting stock, which will have substantially all of the economic rights.
The share capital of Holdco 1 will be distributed as follows: (x) at
least 80% of the voting stock will be acquired and held indirectly by
the Amaro family through a new Chilean corporation (“TEP Chile”), and no
more than 20% of the voting stock will be acquired and held by LAN, and
(y) 100% of the non-voting stock will be acquired and held by LAN.
The non-voting stock of TAM indirectly held by the Amaro family will be
contributed by them to a new wholly-owned Chilean corporation (“Sister
Holdco”). Holdco 1 will incorporate a new Chilean corporation (“Holdco
2”), that will launch a delisting exchange offer pursuant to which all
the holders of TAM stock (other than the Amaro family) may tender their
shares in exchange for the same number of shares of Holdco 2 (the “Exchage
Simultaneously with the settlement of the Exchange Offer, Holdco 2 and
Sister Holdco will merge into LAN, with LAN being the surviving entity.
The exchange ratio in the mergers will be 0.9 shares of LAN per share of
Sister Holdco and Holdco 2, whose sole assets will be the TAM shares
contributed by the Amaro family and acquired in the Exchange Offer,
The commencement of the Exchange Offer will be subject to conditions customary for transactions of this nature, including (i) that the shareholders of LAN approve the mergers, (ii) that no more than 2.5% of holders of LAN stock shall have exercised their appraisal rights (derecho a retiro) under Chilean law and (iii) receipt of approvals from and/or registrations with ANAC, the Comissão de Valores Mobiliários of Brazil, the Superintendencia de Valores y Seguros of Chile, the Securities and Exchange Commission of the United States of America and the applicable antitrust authorities in the relevant countries.
The consummation of the Exchange Offer will be subject to the additional
minimum conditions that the number of shares tendered and not withdrawn
from, or that otherwise approve, the exchange offer are sufficient under
Brazilian law to (i) permit the delisting of the TAM stock from the
BM&FBovespa (“Bovespa”), and (ii) give LAN the right and ability to
effect a statutory squeeze-out of all TAM stock that do not accept the
The transaction contemplates that the LAN stock will be listed in Brazil
in the Bovespa as Brazilian Depositary Receipts and will continue to be
listed in Chile and in the New York Stock Exchange (“NYSE”) as American
Depositary Receipts. The TAM stock will cease to be listed in the
Bovespa and in the NYSE as American Depositary Receipts.
LAN’s name will be changed to “LATAM Airlines Group S.A.” (“LATAM”), and
the share capital of LAN will be distributed approximately as follows
(assuming a 100% of the holders of TAM stock, other than the Amaro
family, tender their shares into the Exchange Offer): (i) LAN
controlling shareholders, 24.07%; (ii) TEP Chile, 13.67%; (iii) other
existing shareholders of LAN, 46.60%; and (iv) tendering holders of TAM
Upon consummation of the transaction, LAN, TAM and their respective
subsidiaries will continue their airline operations as presently
conducted. The Chairman of the Board of LATAM shall be Mauricio Rolim
Amaro. Enrique Cueto shall remain as Chief Executive Officer of LATAM
and Ignacio Cueto shall remain in his current capacity as President and
Chief Operating Officer of LAN’s current operations. The Chairman of the
Board of TAM shall continue to be Maria Claudia Oliveira Amaro, and the
Chief Executive Officer shall be Marco Bologna.
Completion of this transaction is expected to take between six to nine
months. The proposed combination of LAN and TAM as LATAM will produce an
airline group that will be among the major 10 in the world. LATAM will
provide transport services for passengers and cargo to more than 115
destinations in 23 countries, operating a fleet of more than 280
aircrafts and will have over 40,000 employees.
LAN Airlines is one of the leading passenger and cargo airlines in
LAN Airlines and its affiliates have a leading position in their
respective domestic markets of
Currently, LAN Airlines and its affiliates operate one of the most modern fleets in the world, with 118 passenger aircraft, and its cargo subsidiary, LAN CARGO and its respective cargo affiliates, have a fleet of 13 dedicated freighters. The Company has one of the youngest fleets in the world, which has meant greater efficiency and a significant reduction in CO2 emissions, reflecting its strong commitment to environmental protection. LAN is one of the few Investment Grade airlines in the world (BBB). The company’s world class quality standards enabled its membership in oneworld™, the global alliance which LAN has been a member of for over 10 years that encompasses the best airlines in the world.
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