SANTIAGO (Reuters) - A merger between Brazil’s TAM and Chile’s LAN airlines would generate synergies likely to add some $3 billion in value to the new group, LAN’s chief executive was quoted as saying by a local paper on Saturday.
Both companies announced on Friday a proposed merger via a $2.7 billion all-stock transaction, which would create Latin America’s top carrier and the No. 11 in the world in terms of passengers carried.
LAN LAN.SNLFL.N CEO Enrique Cueto told Santiago-based La Tercera daily the merger is crucial for his carrier to compete in a more consolidated global airline industry, break into the booming Brazilian market and generate important savings.
“We believe that the $400 million in annual synergies has an additional value of $3 billion that in time will be reflected in our results,” Cueto said. “If you take the current price, without synergies, its (combined airline) value is around $11.5 billion.”
TAM’s Amaro family and LAN’s Cueto, both of which control their respective airlines, will jointly own a 37-38 percent stake in the combined carrier, said Cueto. His brother Ignacio, LAN’s chief operating officer, said in that same interview that the Cueto family will have a 24-25 percent stake.
The deal will allow both carriers to keep flying with their own brands under the control of a holding company. The structure seems designed to portray a merger of equals that could help it clear potential legal and political hurdles in both countries. Brazilian regulations forbid foreigners from holding more than 20 percent of a domestic airline.
Writing by Alonso Soto; Editing by Eric Beech
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