By IANS/EFE,
Sao Paulo : Delta Air Lines will pay $100 million for a “strategic” minority stake in Brazil’s Gol, the two companies said Wednesday.
Under the terms of the agreement, which is still pending approval by both companies’ boards of directors, Delta’s investment will be in the form of American Depositary Shares representing preferred shares in Gol, the Brazilian airline said in a press release.
The stake purchase is part of a move by Gol, Brazil’s second-largest airline by market value, to boost its capital by close to 280 million reais ($156.5 million) by issuing preferred shares at a price of 22 reais ($12.40) apiece – nearly a 50 percent premium over Gol’s closing price Tuesday.
Gol’s board of directors will meet Dec 21 to deliberate on the capital increase, according to the Brazilian company.
“In the context of the investment, Gol’s controlling shareholder (GOL Linhas Aereas Inteligentes) agreed to elect a Delta representative to the company’s board of directors as long as Delta holds at least 50 percent of the ADSs acquired in the investment, among other conditions,” Gol said.
It added that Delta agreed, for a period of 12 months, not to sell the acquired ADSs and not to acquire any further Gol shares without the Brazilian company’s consent.
The agreement on the stake purchase is part of a larger strategic alliance that also entails expanded code-sharing, co-located airport facilities for easier passenger connections and check-in, coordinated commercial and promotional efforts and frequent-flyer programs.
Under the terms of the deal, Delta will be allowed “to use its code for more Gol flights in Brazil, the Caribbean and South America”, while Gol will be able to “add its code for Delta’s flights between Brazil and the United States, and from the US to other destinations, thereby increasing the number of flight options for clients of both airlines and expanding their geographical reach”, Gol’s press release said.
Delta has a fleet of close to 700 aircraft, flies to nearly 350 destinations in 61 countries and transports more than 160 million passengers annually.
Gol offers nearly 940 flights per day to 63 destinations in Brazil, other South American countries and the Caribbean.
“The experience and knowledge of global aviation acquired by Delta in more than 81 years of operations in the most developed market in the world, combined with the growth potential of Brazilian commercial aviation, provides an opportunity for both companies to increase their return on capital employed in the coming years,” Gol’s press release said.
Atlanta-based Delta, meanwhile, said in a statement that the agreement “will expand cooperation to leverage each other’s strengths and further link Delta’s expansive network with one of Brazil’s largest and most successful airlines”.
“Gol has been a strong partner for Delta in Brazil and Latin America. This agreement reinforces our relationship and moves Delta one step closer to achieving our goal of becoming the best US carrier in the region,” Delta CEO Richard Anderson was quoted as saying.
“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 US- Brazil marketplace.”
Delta noted that Brazil’s economy has undergone a “remarkable period of growth in recent years” and that its gross domestic product came in at 3.7 trillion reais ($2.1 trillion) for 2010.
The South American country is now the world’s seventh-largest economy and is forecast to become the fifth-largest, while its aviation market is projected to become the planet’s fourth-largest by 2014 with more than 90 million passengers, Delta said.