March 17, 2011 / 11:15 PM / 7 years ago

UPDATE 2-Chile regulator to probe LAN-TAM proposed merger

 * Investigation of consumer complaint to last 6-9 months
 * Merger would create Latin America's biggest airline
 * One Brazil regulator has approved the deal
 (Updates with analyst comment, stock move, link to Factbox)
 By Felipe Iturrieta
 SANTIAGO, March 17 (Reuters) - A Chilean regulator said on
Thursday it would probe the proposed merger of regional airline
LAN LAN.SN LFL.N with Brazil's TAM TAMM4.SA TAM.N, in a
setback for a push to create Latin America's biggest carrier.
 LAN had urged the antitrust tribunal to ignore a petition
by a consumer group, Conadecus, concerned that the
investigation could delay or even block a signed merger to
create one of the world's top 10 airlines. Brazilian regulators
are seen approving the deal.
 "The tribunal has rejected the submissions of LAN, TAM and
(anti-trust agency) FNE, and so the start of the investigation
sought by Conadecus remains in place," said Alejandro Domic,
secretary of Chilean anti-trust tribunal TDLC.
 He said the probe could last until the end of the year.
 "Markets expected, after Brazil's approval, that the
process would follow the same way. It is the worst scenario.
... at least in the short term it will deeply impact on the
stock" of LAN, said Elizabeth Palma, an analyst at the Tanner
brokerage.
 LAN was not immediately available for comment. It has
offered to cut fare prices and lay on more flights if the
merger passes; it previously said it could take its case to the
Supreme Court. For a factbox on LAN-TAM merger [ID:nN17190954]
 The tribunal's move comes after Brazil's civil aviation
authority gave the proposed merger the green light with no
restrictions earlier this month, though approval of other
Brazilian regulators is still pending. [ID:nN03126214]
 LAN, considered one of Latin America's most profitable
airlines, had said on Jan. 19 that the merger could take up to
nine months pending approval from authorities in both
countries. [ID:nN19206493]
 Analysts say LAN would effectively acquire the Brazilian
airline if the deal goes through, with Chile's Cueto family --
LAN's main shareholder -- emerging with the major stake in one
of the world's top carriers.
 Since Conadecus asked TDLC to probe the merger in late
January, LAN shares have declined 13.3 percent, while TAM stock
fell 16.1 percent. The Chilean regulator announcement was
released after Chilean and Brazilian stock markets closed.
 (With reporting by Juan Lagorio, Brad Haynes, Fabian Cambero,
Moises Avila and Antonio de la Jara. editing by Simon Gardner,
Leslie Adler, Gary Hill)

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