LAN Airlines SA – now renamed LATAM Airlines Group SA – and TAM SA have completed the exchange offer and merger to combine their businesses. LATAM Airlines Group says it 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.
The exchange offer allowed TAM’s shareholders to elect to exchange their TAM shares for LAN shares at a ratio of 0.9 of the latter for each of the former. The offer was completed on June 22 after 99.9% of TAM’s participant shares agreed with the deregistration of TAM as a public company in Brazil.
The partnership was first announced in August 2010 and binding agreements and authority approval began in January last year.
Mauricio Rolim Amaro, Vice Chairman of TAM SA and Chairman of the merged group, commented: “The growth [that] 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 our shareholders.”
The airlines will continue to operate under their existing brands and will maintain their present headquarters.
Financially, LATAM expects a combined turnover of US$170 million to $200 million in its first year, with a one-time cost for the closing of the merger at the same estimated figure. Annual turnovers are then projected to reach between $600 million and $700 million after four years. Approximately 60% of estimated synergies is expected to come from revenue increases in the passenger and cargo businesses and cost savings are forecast to generate the remaining 40%.
It is yet to be revealed with which airline alliance the merged group will align. Previously, LAN and TAM belonged to the oneworld and Star Alliances respectively.