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Brazil's Tam Surges Most in Two Weeks as Finance Minister Backs Lan Deal

Tam SA climbed the most in more than two weeks after Brazilian Finance Minister Guido Mantega said Lan Airlines SA’s planned purchase of the carrier satisfies foreign ownership rules, easing concern it would be blocked.

Tam gained 3.6 percent to 36.36 reais in Sao Paulo trading. The shares jumped as much as 11 percent earlier today, the most intraday since the deal was announced on Aug. 13.

“There was fear that the deal was so convoluted,” said Arthur Byrnes, who helps manage about $800 million at Deltec Asset Management Corp. in New York. “Mantega saying it’s good for both companies and Brazil takes away a certain amount of that fear.”

Santiago-based Lan agreed to buy Tam on Aug. 13 in an all- stock deal worth as much as $3.8 billion, with investors getting 0.9 Lan share for each Tam share held. Lan will have about 70 percent of the combined carrier, LATAM Airlines Group. Tam will be delisted as part of the deal.

“It meets the legal requirements,” Mantega said today in an interview in Brasilia. “If it didn’t, it wouldn’t have been done. Lan is powerful and strong, and so is Tam. It’ll be good.”

Because Brazilian law caps foreign capital in airlines at 20 percent, Tam’s controlling shareholders will retain 80 percent of the voting stock in the Brazilian company while Lan shareholders will have about 70 percent of the combined carrier.

“I saw the legal framework and, from what they showed me, here in Brazil they will only have 20 percent and will share equal power in the foreign holding company’s board even though Lan owns more,” said Mantega.

The deal must be approved by Brazil’s civil aviation authority and the country’s antitrust regulator.

The Lan-Tam deal will create the world’s 11th largest carrier by passengers and would be the biggest acquisition of an airline in at least two decades, according to data compiled by Bloomberg. Only Cathay Pacific Airways Ltd. and China Eastern Airlines Corp. will be larger in market value.

The purchase was announced five months after Chile’s President Sebastian Pinera sold his 26 percent stake in Lan for $1.5 billion and after Lan shares doubled in the past year.

To contact the reporters on this story: Andre Soliani in Brasilia at asoliani@bloomberg.net; Arnaldo Galvao in Brasilia at agalvao1@bloomberg.net

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