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Azul publishes a note on the proposed business combination with LATAM
Airbus A321 da Latam
Sky KoreSCL, CC BY-SA 4.0, via Wikimedia Commons
Rafael Ramos
11/29/2021
Azul published a note clarifying the offer it made on November 11 to combine its operations with LATAM. The president of LATAM, Roberto Alvo, had already spoken about this proposal, at a press conference. Click on the external link to read the article.
The document included the prospection of approximately 5 billion dollars guaranteed by LATAM ad hoc creditors, composed of several financial institutions. The idea was that the participation in the company would be shared between the current shareholders of Azul, the creditors of LATAM who would receive compensation in shares, and the participants of Novo Capital.
In a statement, Azul said that the proposal would provide significant growth in the air network, generating more convenience, products and services for customers of both companies. "These benefits would generate synergies estimated at more than US$4 billion in incremental market value above LATAM's independent plan, which would therefore provide great value creation for Azul's shareholders and greater recovery for all LATAM creditors, respecting the rules of the US Chapter 11 process”, reads a note from Azul.
However, Azul considers the value attributed to Latam higher than acceptable. In addition, the uncertainty about the future, especially regarding international travel, is too great for a business of this value. Finally, the company mentions that it will continue to focus on its competitive advantages and growth.
Airbus A350
Latam Brasil
Adam Moreira, CC BY-SA 4.0, via Wikimedia Commons
Read the note in full below:
As disclosed by LATAM in a public document filed on November 26, 2021, Azul clarifies that “it confidentially submitted on November 11, 2021, together with some creditors of LATAM, a non-binding proposal regarding a business combination with LATAM ("Proposal"). The Proposal includes the prospecting of approximately US$5 billion of equity financing (“New Capital”) guaranteed by certain members of the ad hoc group of LATAM creditors, comprised of various financial institutions (“Ad Hoc LATAM Lenders”)”.
According to the Proposal, the participation in the combined company would be shared between the current shareholders of Azul, the creditors of LATAM who would receive compensation in shares, and the participants of Novo Capital. In addition, Azul and Latam Ad Hoc Creditors agreed that the governance of the combined company would be comprised of an independent group of directors, ensuring alignment between the interests of the combined company's shareholders.
Azul believes that the Proposal would provide significant growth in the air network, with expansion in the number of destinations and greater convenience, products and services, benefiting both Azul and LATAM customers. These benefits would generate synergies estimated at more than US4 billion in incremental market value above LATAM's independent plan, which would therefore provide great value creation for Azul shareholders and greater recovery for all LATAM creditors, respecting the rules of the US Chapter 11 process.
The autonomous plan presented by LATAM is, by definition, incapable of generating synergies from this business combination. In addition, at this time, the company's value in the plan presented by LATAM is higher than Azul believes to be reasonable, especially given the continuing uncertainties in the sector, especially in the international long distance markets.
As a result, Azul will continue to focus on its unique competitive advantages provided by its unique network and flexible fleet, complemented by the high growth potential of businesses such as Azul Cargo, Azul Viagens and TudoAzul, and evaluating future partnership and consolidation opportunities.
Airbus A320neo
Por Rafael Luiz Canossa, CC BY-SA 2.0
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Rafael Ramos
Aviation enthusiast from an early age, he had his first contacts with the area developing that good old habit of spending dozens of hours in front of the screens of Micrsoft Flight Simulator and other simulators. With a solid background in various technological areas, including engineering and chemistry, Rafael has rejoined aviation as editor and author of articles and materials on our portal, providing invaluable help to the dynamics and expansion of the website and the aeronautical community, bringing us the news and updates so indispensable for us to remain current in our area of operation.
   
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