Air France-KLM gains Brazil foothold with $100 million Gol deal

SAO PAULO Wed Feb 19, 2014 6:29pm EST

SAO PAULO (Reuters) - Air France-KLM SA (AIRF.PA) will invest $100 million in Brazilian airline Gol Linhas Aereas Inteligentes SA (GOLL4.SA)(GOL.N) as the European carrier seeks to take advantage of a potential surge in travel demand during the coming soccer World Cup and the 2016 Olympics, both to take place in Brazil.

Under terms of the transaction, Air France-KLM will buy $52 million of Gol preferred shares at $12.23 each, Gol said in a securities filing on Wednesday. The remaining $48 million will come in the form of commercial agreements and a bonus based on the achievement of potential cost savings.

Air France-KLM will pay Gol a premium of about 169 percent on its stock, based on Wednesday's closing price of $4.55, according to Thomson Reuters calculations. One of Gol's preferred shares traded in Brazil equals one U.S. traded share. Gol's shares closed at 10.93 reais in Sao Paulo on Wednesday.

Both companies expect to obtain regulatory approval within the next three months, in time for the start of the World Cup in June. The transaction, which involves an exclusivity agreement for Gol and Air France-KLM in European and Brazilian markets, will allow both companies to increase their reach to up to 318 destinations and more than 115 countries.

The deal comes at a particularly difficult time for Brazilian airlines, which for the past couple of years have grappled with surging operating costs, the impact of a weakening currency on fuel prices and sluggish growth in Latin America's largest economy.

(Reporting by Caroline Stauffer, Guillermo Parra-Bernal, Alberto Alerigi and Aluisio Alves; Editing by Richard Chang)