Latam Airlines Climbs to Three-Month High on Stake-Sale Wagers

  • IAG's CEO says company has `clear desire' to work with Latam
  • Latam is Chile's worst performing major stock this year

Latam Airlines Group SA rallied to a three-month high on speculation that IAG SA wants to buy a stake in Latin America’s largest carrier.

The shares gained 2.4 percent to 3,998.8 pesos at the close in Santiago, its highest since Aug. 12.

While there aren’t any talks underway right now, IAG has a “clear desire to work closer” with Latam, Chief Executive Officer Willie Walsh told analysts in London on Friday. IAG, which has made three airline purchases since its formation from a merger of British Airways and Spain’s Iberia in 2011, said it sees scope for more transactions and is particularly interested in a deal that would reduce its reliance on demand from travelers vacationing during the northern hemisphere’s summer months.

That’s reviving speculation Latam will seek to form a partnership through a capital increase, Credicorp Capital said in a note to clients Monday.

Latam Airlines, formed by the takeover of Brazil’s TAM SA by Lan Airlines SA in 2012, is the worst performing stock this year in Chile’s IPSA benchmark index, with a 43 percent plunge. Brazil’s recession this year is adding to the strains on an airline that was, at its creation, the world’s largest by market value and the dominant South American carrier. With some Lan and Tam operations are still separate after the merger, the economic slowdown means the benefits of the deal are being pushed further into the future.

Share price has plunged since merger of Lan with Tam

Worsening leverage ratios may force Latam Airlines to sell between $500 million and $1 billion in new shares, Santiago-based brokerage Larrain Vial said in September in a note.

An official at Latam’s press office, who asked not to be identified citing company policy, declined to comment.

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