LAN
Airlines S.A. (which has been renamed LATAM Airlines Group S.A.) and
TAM S.A. report that they have successfully completed the exchange
offer and merger through which they have combined their businesses
and created the LATAM Airlines Group S.A.
LATAM
Airlines Group S.A. will offer passengers more flights to more
destinations than any other affiliated group of airlines in South
America, initially reaching around 150 destinations in 22 countries
and transporting cargo to 169 destinations in 27 countries.
As
previously announced, 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 completed with the auction on 22 June 2012, was
subject to the condition that more than two thirds 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
TAM.
"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.
"The
growth LATAM Airlines Group is expected to generate will allow us to
offer our customers flights to new destinations, create more
opportunities for our more than 51,000 employees, and offer
greater value for shareholders. In addition, we can support
the economic, social and cultural development of our region,
improving the connectivity of passengers and cargo in South America
and to the rest of the world," said Mauricio Rolim Amaro, Vice
Chairman of TAM S.A.
Benefits
for Passengers
Among
the benefits that passengers of both LAN and TAM will see over time
are increased connectivity, improved routes and frequencies, and
reduced connection times. Additionally, as of 27 June 2012 the
members of the airlines’ frequent flyer programs, LANPASS and TAM
Fidelidade, will be able to earn and redeem kilometres/points over
the complete route networks of LAN and TAM. In addition, members of
the senior frequent flyer levels of both airlines (Comodoro / Black
and Premium Silver / Red) may add to their existing benefits
preferential access to services for themselves and a companion,
including access to the VIP lounges of both airlines, preferential
check-in and boarding and priority baggage.
LATAM
Airlines Group will continue to advance the integration of their
operations in order to deliver the best service to
customers.
The
Structure
As
to 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 chair 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 São Paulo. Cueto also
announced that both LAN and TAM will continue to operate under their
existing brands in the same way as they have done until now, with a
commitment to safety,
service and quality: "This is the beginning of a long journey
and the benefits to our customers will be added gradually as the
integration of our companies’ progresses."
LAN
and TAM not only share a common vision of business but also a passion
for delivering excellent service to their passengers and cargo
customers, and are committed to safety, reliability and high quality
service. The partnership was first announced in August 2010. In
January 2011, the two companies announced that they had entered into
binding agreements and thereafter referred the transaction to the
approval of various authorities and agencies, including the National
Civil Aviation Agency of Brazil (ANAC), the TDLC (Tribunal de Defensa
de la Libre Competencia, Chile’s antitrust authority), and the
CADE, Brazil’s antitrust authority.
Cargo
Business
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 provide the leading cargo network in this region, offering its
services to 169 destinations in 27 countries around the world.
As
a result, LATAM Airlines Group will generate significant benefits for
cargo customers, including access to the broadest network of routes
in Latin America with connections to all major destinations in the
world; modern infrastructure; larger capacity by combining the cargo
availability of both companies on both passenger and freighter
aircraft; and an extensive range of products and services both
domestically and internationally. In addition, the combination will
create access to efficient systems and technological tools that
deliver visibility of shipments through e-tracking, and soon
e-booking, and the integrated know-how of teams with vast industry
experience who know both customer needs and how to respond to them.
Synergies
from the Integration
Both
companies project pre-tax synergies of approximately US$170 million
to US$200 million for the first 12 months after the amalgamation,
gradually increasing to annual pre-tax synergies of between US$600
million and US$700 million, beginning four years after the completion
of the integration. LATAM Airlines Group S.A. 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 amalgamation. 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%.