Brazil's Azul backs off from LATAM bid, citing valuation concerns

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An Azul aircraft prepares for departure at Congonhas airport in Sao Paulo, Brazil, November 24, 2015. REUTERS/Paulo Whitaker/File Photo

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SAO PAULO, Nov 29 (Reuters) - Azul SA confirmed making an offer this month to combine with Chile's LATAM Airlines Group (LTM.SN), which is in bankruptcy proceedings, but the Brazilian airline said it had since decided to focus on its own operations.

LATAM shares plunged on Monday by as much as 85% in Santiago trading, before paring losses to around 45%. read more

Azul shares rose 2.8% in Sao Paulo after saying in a securities filing late on Sunday it would consider potential partnerships only in the future.

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The Brazilian airline said its non-binding proposal submitted on Nov. 11 had included around $5 billion in equity financing and was backed by some creditors of LATAM.

However, Azul added that LATAM's valuation in the bankruptcy proceedings had become higher than it found acceptable, citing ongoing uncertainty in the aviation industry amid the COVID-19 pandemic, especially in long-haul markets.

LATAM filed a reorganization plan on Friday in which it proposed an $8.19 billion infusion of capital into the group in a bid to exit its Chapter 11 bankruptcy. read more

The Chilean company previously said it had received several offers to fund the exit from Chapter 11 bankruptcy, each of which was worth more than $5 billion. read more

Azul said in its filing that it believed its non-binding proposal would have provided significant increased network growth and generated synergies estimated at more than $4 billion.

It added that "the standalone plan presented by LATAM is, by definition, unable to generate synergies from a combination".

Goldman Sachs analysts warned in a note to clients that any tie-up between the airlines would have held more 60% of Brazil's domestic air travel market, which could have attracted "extensive" scrutiny from antitrust regulator CADE.

Azul said it will continue to focus on the competitive advantages of its own network, while evaluating future partnerships and consolidation opportunities.

The rise in the group's shares on Monday followed a steep fall last week, when travel-related stocks were dragged down by the detection of a new coronavirus variant in South Africa. read more

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Reporting by Gabriel Araujo; Editing by Jan Harvey

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