Gol Gains as Bradesco Sees 50% Rally in Potential Delta Takeover

  • Azul could join merger negotiations, according to bank's note
  • Restrictions to foreign capital may be lifted: Bradesco

Gol Linhas Aereas Inteligentes SA, Brazil’s second-biggest airline, climbed after Banco Bradesco SA said the stock could rally as much as 50 percent should the company become a takeover target for Delta Air Lines Inc. or Azul Linhas Aereas Brasileiras SA.

American depositary receipts surged as much as 12 percent to 30 U.S. cents Wednesday, and closed at 28 cents in New York. The airline also outperformed the Ibovespa stock gauge, which joined a tumble in emerging markets.

Burdened by a deep recession in Latin America’s largest economy and ballooning losses, Gol has plunged 95 percent in the past 12 months. Given the grim situation, Brazil may lift restrictions on foreign capital in the airline industry, which could accelerate a potential deal with Delta or Azul, according to Victor Mizusaki, an analyst at the investment banking unit of Bradesco. Delta currently has a 9.5 percent stake in Gol, below the 20 percent limit.

“A potential M&A deal with Delta and Azul Airlines, combined with earnings recovery, could boost the share price performance,” Mizusaki, who rates the local shares a buy, said in a note to clients.

Spokesmen for both Gol and Azul declined to comment on the takeover speculation of the low-cost carrier. Sara Lora, a spokeswoman for Delta, said the airline can’t comment on its future plans for the Brazilian airlines.

Gol said it’s aware of several bills being discussed in Congress that would increase the limit on foreign ownership of Brazilian airlines. It’s unclear if the government would make this change through a provisional measure, according to Alberto Fajerman, the director of institutional relations at Gol.

“We certainly support the increase,” he said.

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