Tribunal de Defensa de la Libre Competencia, or TDLC as the court is known, gave final Chilean clearance for the transaction in a split vote, according to a statement sent by e-mail today. Conditions include Lan and Tam opening up their frequent flyer program to other airlines, exiting one of their global alliances and capping Santiago-Sao Paulo fares until they exchange four daily slots in Sao Paulo’s Guarulhos airport with other carriers. The tie-up still requires Brazilian approval.
“The measures seek to promote effective competition in the Chilean airline market, and while that doesn’t occur, protect consumers from the effects of concentration,” the TDLC said in its statement.
Lan was little changed at 13,020 pesos in Santiago trading at 1:33 p.m. New York time after gaining as much as 4.1 percent. Tam advanced 4.1 percent to 38.15 reais and earlier jumped 12 percent, the most since August 2010 when the deal was announced.
“At a first glance the conditions don’t seem too restrictive,” Jorge Sepulveda, an analyst at Santiago-based Euroamerica Corredores de Bolsa SA, said by telephone. “The conditions are mostly related to defending competition in the local market and are in line with what we expected.”
A Lan-Tam combination would have a market value of $12 billion, overtaking China Southern Airlines Co. and Singapore Airlines Ltd. as the world’s largest airline after Air China Ltd., according to data compiled by Bloomberg. The deal would give Santiago-based Lan 41 percent of the domestic airline market in Latin America’s largest economy and $6.5 billion in annual sales.
Lan is reviewing the condition set by the TDLC, the Santiago-based carrier said in an e-mailed statement.
Under terms of the transaction announced in August last year, investors would receive 0.9 Lan share for each share of Tam they own. Lan would have about 70 percent of a holding company called LATAM Airlines Group while Tam’s controlling shareholders would retain 80 percent of the Brazilian carrier’s voting stock to comply with a law that caps foreign capital at 20 percent. Lan’s Enrique Cueto would be chief executive of the new company while Tam’s Mauricio Rolim Amaro would be chairman. Both airlines would continue operating separately with their own brands.
Chile’s consumer defense association Conadecus filed in January a petition to the TDLC to block the deal on grounds that it would reduce competition. Separately, Lan and Tam had reached an out-of-court agreement on mitigation measures with Chile’s National Economic Prosecutor to speed up approval of the deal. The TDLC agreed to review the case and put the deal on standby.
“Our lawyers are reviewing the conditions and we should be in a position to make a statement hopefully within the next 24 hours,” Conadecus Chairman Hernan Calderon said today by phone.
Calderon said Sept. 16 that Conadecus could appeal a favorable ruling for the deal if it didn’t appropriately protect consumers, according to an interview with Diario Financiero. Calderon declined to comment today on whether he planned to appeal the ruling until reviewing the TDLC’s conditions.
Brazil’s competition defense authority Cade probably will rule on the transaction by the end of October or early November, Olavo Chinaglia, the commissioner responsible for the case, told reporters Aug. 31. Brazil’s civil aviation agency, known as Anac, approved the deal in March.
Gol Linhas Aereas Inteligentes SA (GOLL4), Brazil’s second-largest airline by market value, advanced 4.6 percent to 12.55 reais after saying the country’s civil aviation agency, known as Anac, approved its acquisition of Webjet Linhas Aereas SA. The deal must still be approved by Brazil’s Cade.
Embraer SA (EMBR3), the world’s fourth-largest aircraft maker, gained 6.1 percent to 12.02 reais. The company said it forecasts airline demand for regional jets at $320 billion in the next 20 years, according to its market outlook published on its website. In July, Embraer had estimated demand at $200 billion.
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