June 12, 2012 / 2:28 PM / 8 years ago

UPDATE 1-LAN Airlines extends TAM share swap, delays merger

* Holdouts among TAM minorities surprise airlines

* LAN waives 5 pct limit on remaining TAM free float

* Airlines extend share swap for another 10 days

By Brad Haynes and Alexandra Ulmer

SAO PAULO/SANTIAGO, June 12 (Reuters) - Chile’s LAN Airlines decided to wait another 10 days to carry out a share swap with rival TAM after holdouts among the Brazilian carrier’s minority shareholders put a hitch in a takeover that would form Latin America’s largest airline.

LAN said it was removing a requirement of 95 percent approval among TAM shareholders after acceptance of the swap accounted for 94.4 percent of shares in circulation. The deal should not have trouble clearing the bar of two-thirds acceptance established under Brazilian law.

The number of holdouts surprised analysts, but they said it was not likely to derail the takeover.

“This is a technicality of the process, it’s a minor headache, but it does not impact the merger,” said Michael Linenberg, senior airlines analyst with Deutsche Bank Securities in New York.

TAM shares jumped about 6 percent in early trading on Tuesday after dropping as much as 11 percent on Monday on concerns the share swap would fail. LAN shares slipped about 1 percent in early trading.

Linenberg said inaction among minority shareholders may have complicated the process.

“They have got to find out where their shares are held, they could be in some grandma’s account somewhere in Brazil, deep in some vault, and they don’t even know they have the stock,” he said.

LAN said in August 2010 it planned to take control of TAM through an all-stock transaction worth an estimated $2.7 billion at the time.

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