UPDATE 3-Chile's Pinera offers Cuetos $1.23 bln LAN stake

Thu Feb 18, 2010 3:11pm EST

* Pinera offers 21.18 pct LAN stake to Cuetos

* Stake offered to Cuetos worth $1.23 billion

* Sale of separate 5.16 pct stake still pending (Updates share price, adds analyst quotes)

By Rodrigo Martinez and Simon Gardner

SANTIAGO, Feb 18 (Reuters) - Chilean President-elect Sebastian Pinera's holding companies said on Thursday they offered a 21.18 percent stake in regional airline LAN LAN.SN LFL.SN worth $1.23 billion to Chile's Cueto family.

Holding companies Axxion AXX.SN and Santa Cecilia said in a joint statement that they offered the Cueto family's holding company, Costa Verde Aeronautica, 71,754,546 shares in LAN priced at 9,099.58 pesos apiece.

They said they would announce the sale of a remaining 5.16 percent that Pinera holds in the airline shortly. It was unclear to whom the remaining stake would be sold.

Shares in LAN, one of Latin America's biggest airlines, were down 0.78 percent at 9,240 pesos on Thursday afternoon, under-performing the wider IPSA .IPSA leading share index. The stock was already trading lower before the announcement. [ID:nN18202749]

Conservative billionaire Pinera had vowed to sell his stake in LAN to counter critics who said his business empire posed conflicts of interest with the role of president.

Pinera won last month's presidential run-off and will end 20 years of center-left rule when he takes office March 11. He has already placed hundreds of millions of dollars worth of investments in a blind trust.

The Cueto family, which has the first option to purchase the stake, separately approved a $1 billion capital increase this month seen aimed at buying into Pinera's LAN stake.

"The intention is ... an eventual sale of Axxion and Inversiones Santa Cecilia's shares in LAN to Costa Verde Aernonautica should happen as soon as possible," Pinera's two holding companies said in the joint statement.

LAN's history of profit and combination of cargo and passenger business have given it a reputation as a solid business in an often troubled industry.

Brazil's largest airline, TAM Linhas Aereas TAMM4.SN(TAM.N), last month declined to comment on a media report that it was in talks to buy into Pinera's stake in LAN.

However, analysts still see TAM as the most likely suitor for Pinera's remaining LAN stake.

"Even though they (TAM) have said no, if they did buy it it would be good for LAN," said Claudio Gonzalez, head of research at the Tanner brokerage. "An airline would be a very good ally for the Cuetos, and in this case TAM gives them access to the Brazilian market, which is very important."

TAM has an operational partnership with LAN via codeshare and helps maintain the company's aircraft.

Tanner's Gonzalez said the 9,100 pesos pricing for the stake offered to the Cueto family was roughly in line with the recent trading average, and represented fair value. Gonzalez expects LAN to continue to rally and sees the shares trading around 10,000 pesos by the end of the year.

Axxion has said Pinera will place the funds raised from the stake sale in a blind trust, under which a third party manages investments without any involvement or influence of the investor.

Analysts expect investment from the blind trust to help continue to fuel a market rally that has driven Chile's stock exchange to new life-highs, though they say it is not clear in which sectors or companies the trust would likely invest. (Writing by Simon Gardner, editing Bernard Orr)

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