Brazil's second largest airline said Wednesday it had agreed to sell a minority stake in the company to Delta Air Lines.
GOL Linhas Aereas Inteligentes SA said in a regulatory filing with the Brazilian Securities and Exchange Commission on Wednesday that Delta Air Lines will pay $100 million for a "strategic minority interest" of GOL's preferred shares.
GOL said the investment will be in the form of American Depositary Shares.
"This agreement reinforces our relationship and moves Delta one step closer to achieving our goal of becoming the best U.S. carrier in the region," Delta Chief Executive Officer Richard Anderson said in a statement. "By forming a long-term commercial partnership, we will capitalize on the strengths of our two networks to provide expanded customer benefits and better serve the U.S.- Brazil marketplace."
For Constantino de Oliveira Junior, GOL's CEO, the agreement will strengthen the airlines capital structure and generate more value for its shareholders.
"Delta's vast experience in the U.S. combined with Brazilian commercial aviation's growth potential, provides an opportunity to improve our business model and return on capital employed over the next years, "he said. "Our customers will benefit from additional flight options, more flexibility and new products and services."
In February, Atlanta-based Delta and GOl entered into a code-sharing agreement that enable Delta to sell seats on 56 GOL flights between Rio de Janeiro or Brasilia and 15 Brazilian destinations.
Delta to Buy $100 Million Gol Stake to Boost Brazil Flying
Dec. 7 (Bloomberg) -- Delta Air Lines Inc. agreed to buy a $100 million stake in Gol Linhas Aereas Inteligentes SA, Brazil’s second-largest airline by market value, and begin booking passengers on each other’s jets.
Gol rose 3.6 percent to 15.50 reais in Sao Paulo after climbing as much as 9 percent earlier. Delta, the world’s second-biggest carrier, gained 1.1 percent to $8.56 at 4 p.m. in New York.
Buying 3 percent of Gol expands Delta’s foothold in Latin America, the region where passenger yields, or the average fare per mile, are highest for U.S. airlines, according to Bloomberg Industries data. Delta trails AMR Corp.’s American Airlines and United Continental Holdings Inc. in Latin America traffic.
“This is the most important relationship we have in South America, and we’re very, very pleased with it,” Delta Chief Executive Officer Richard Anderson said today in an interview in Sao Paulo, where Gol is based.
This is Atlanta-based Delta’s second investment in a foreign carrier this year, after buying a $65 million stake in Grupo Aeromexico SAB in August to deepen their alliance on flights between their home countries. That accord gave Delta a board seat, as does today’s agreement with Gol.
Delta’s stake in Gol is “very positive” because it implies a higher value for the Brazilian airline and gives the carrier access to a global network, Edigimar Maximiliano Jr., a Banco Bradesco SA analyst, said in a note to clients.
Booking Codes
The companies will place their industry booking codes on each other’s flights, allowing them to take reservations for passengers flying on either airline. Travelers also will be able to accrue and redeem frequent-flier points on both carriers.
Delta will buy the Brazilian airline’s American depositary receipts backed by preferred shares, Gol said today in a regulatory filing. Gol will boost its capital by as much as 280 million reais ($160 million) by issuing preferred shares for 22 reais apiece, 47 percent more than yesterday’s closing price.
Gol also is transferring leases to Delta on two parked Boeing Co. 767 wide-body jets, saving 50 million reais a year.
Gol isn’t joining the SkyTeam global marketing alliance, of which Delta is an anchor member, CEO Constantino de Oliveira Jr. told reporters. Delta has “no intentions” to increase its stake in Gol, said President Ed Bastian, who will join Gol’s board.
Delta will keep the board seat as long as the U.S. carrier retains at least 50 percent of the acquired shares, according to the Gol filing. Delta agreed not to sell the stake for 12 months and won’t buy additional shares without Gol’s consent.
‘Significantly Undervalued’
“We aren’t making this investment to turn a profit on a stock,” Anderson said in the interview. “We’re making the investment because we are recognizing the inherent value of the relationship we will have together and, candidly, the stock is significantly undervalued in the market today.”
Gol fell 40 percent this year before today. The airline was advised by Morgan Stanley, and Barclays Capital advised Delta.
Gol trails Tam SA in market value in Brazil. Tam is being acquired by Chile’s Lan Airlines SA, Latin America’s largest carrier by market value, in a $3.3 billion all-stock transaction. The purchase, announced in August 2010, needs approval by Chilean and Brazilian regulators, and the companies expect it to close in next year’s first half.
Yields on Gol’s perpetual dollar bonds tumbled 20 basis points, or 0.2 percentage point, to 10.93 percent at 7:26 p.m. in Sao Paulo, the most since Oct. 17, according to data compiled by Bloomberg. The yield on notes due 2020 fell 25 basis points to 10.8 percent.
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