Shares of Brazil airline Gol rise on Varig deal
(Adds details, background, updates share price)
SAO PAULO, March 29 (Reuters) - Shares of low-cost Brazilian airline Gol Linhas Aereas Inteligentes (GOL.N) rose more than 6 percent on Thursday, a day after the company said it would buy rival Varig in a deal valued at $320 million.
Gol shares (GOLL4.SA) were up 6.34 percent at 58.70 reais in early trading in Sao Paulo, outpacing a 1.23 percent rise in the benchmark Bovespa index .BVSP.
Gol said late on Wednesday that it would acquire ailing carrier Varig, marking the second time that Varig has changed hands in less than a year.
Gol shares rose more than 4 percent on Wednesday in anticipation of the deal.
Gol will pay $275 million in cash and stock for Varig, which emerged from bankruptcy protection last July after being sold for just $24 million to a group of investors including the U.S. investment fund Matlin Patterson.
Gol also agreed to assume $45 million of debentures issued by Varig, which in its heyday was Latin America's largest airline.
The acquisition will give Gol, Brazil's No. 2 air carrier, access to Varig's routes to the United States and Europe. Gol, which has grown rapidly since it was founded six years ago, already flies to several countries in South America.
Together, the two companies will have a 45 percent share of the Brazilian aviation market and will fly an estimated 20 million passengers a year. That will allow Gol to narrow the gap on the current market leader, TAM Linhas Aereas (TAMM4.SA)(TAM.N), which has about 50 percent of the domestic market.
The deal will also give Gol access to Varig's coveted slots in Sao Paulo's domestic airport Congonhas.
Gol said the two airlines will be managed as independent companies. It will operate the acquired airline under its old Varig brand and offer differentiated services incorporating Gol's low-cost business model.
Varig flights will drop first-class seats and will operate only economy and business class.
Gol plans to boost Varig's fleet to 34 aircraft -- 20 Boeing 737s and 14 Boeing 767s -- from 17. Gol has 66 aircraft.
((Reporting by Todd Benson, editing by John Wallace; Reuters Messaging: todd.benson.reuters.com@reuters.net; +55 11 5644-7703)) Keywords: BRAZIL GOL/SHARES
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