LAN Airlines (which has been renamed LATAM
Airlines Group) and TAM have successfully completed the exchange
offer and mergers through which they have combined their
businesses and created the LATAM Airlines Group.
LATAM Airlines Group will offer passengers more
flights to more destinations than any other affiliated group of
airlines in South America, initially reaching about 150
destinations in 22 countries and transporting cargo to 169
destinations in 27 countries.
The transaction was
carried out through an exchange offer in which TAM's shareholders
could elect to exchange their TAM shares for LAN shares at a ratio
of 0.9 LAN shares for each TAM share. The offered LAN shares will
be delivered in the form of BDRs (Brazilian Depositary Receipts)
in Brazil and ADRs (American Depositary Receipts) in the United
States. The exchange offer, which was materialized with the
auction on 22 June 2012, was subject to the condition that more
than 2/3 of the TAM shares that participate in the offer agree
with the deregistration of TAM as a public company in Brazil. This
delisting condition was satisfied when 99.9% of the participant
shares agreed with TAM’s deregistration. The tendered shares
together with the TAM shares committed by the TAM Controlling
Shareholders represented 95.9% of the total outstanding shares of
"The creation of this group of airlines is an
opportunity to take South America to the world and to allow us to
position ourselves to operate in an increasingly competitive
environment due to the continuing consolidation of the global
airline industry," said Enrique Cueto, Executive Vice
President-CEO of LATAM Airlines Group.
Among the benefits that passengers of
both LAN and TAM will be able to access over time are increased
connectivity, improved routes and frequencies and reduced
connection times. Additionally, starting 27 June 2012 the members
of frequent flyer programs LANPASS and TAM Fidelidade will be able
to earn and
redeem kilometers/points over the complete flight networks of LAN
In addition, members of the senior frequent flyer levels
of both airlines (Comodoro / Black and Premium Silver / Red) will
be able to
add to their existing benefits preferential access to services for
themselves and a companion, including access to VIP lounges of
both airlines, preferential check-in and boarding and priority
As for the
corporate structure, Mauricio Rolim Amaro, currently Vice Chairman
of TAM, will become Chairman of LATAM Airlines Group S.A. Maria
Claudia Amaro will remain as chairwoman of the Board of TAM S.A.
and will also become a member of the Board of Directors of LATAM
Airlines Group S.A. Enrique Cueto, currently Executive Vice
President-CEO of LAN Airlines S.A., will become Executive Vice
President-CEO of LATAM Airlines Group S.A. Ignacio Cueto,
currently President and Chief Operating Officer of LAN Airlines
S.A., will become CEO of LAN Airlines. Finally, Marco Antonio Bologna will remain as CEO of TAM S.A. and TAM Linhas Aéreas S.A.
Each airline in the LATAM
Airlines Group will maintain its present headquarters: LAN in Santiago and TAM in Sao Paulo.
and TAM will also continue to operate under their existing brands
in the same way as they have done until now.
LAN Cargo and its affiliates - ABSA in Brazil,
MAS Air in Mexico and Línea Aérea Carguera in Colombia - are the
largest group of air cargo operators in Latin America. By adding
the leadership of TAM Cargo in the Brazilian domestic market, LATAM Airlines Group will offer services to 169 destinations in 27 countries around the world.
project pre-tax synergies of approximately US$170 million to
US$200 million for the first 12 months after combination,
gradually increasing to annual pre-tax synergies of between US$600
million and US$700 million, beginning four years after the
completion of the combination.
LATAM Airlines Group also
estimates one-time costs associated with the closing of the
transaction and the realization of synergies of approximately
US$170 million to US$200 million, most of which are expected to be
incurred in the first 12 months after the completion of the
Approximately 60% of the total estimated potential
synergies will derive from revenue increases in the passenger and
cargo businesses and, therefore, the cost savings are expected to
generate the remaining 40%.
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