Gol cancel proposed takeover of smiles unit, Shares in Gol LinhasAereasInteligentes , Brazil’s largest airline, recovered after early losses on Monday after the company said it will review the proposed takeover of its mileage subsidiary Smiles Fidelidade SA.
Shares in Gol were 2.3 % and shares in Smiles 3.5% after Gol said the Brazilian stock exchange decided the structure proposed by Gol to take over its subsidiary could not be approved. Gol wanted to list its shares in a segment of the stock exchange with increased governance rules, where Smiles is already listed, and pay Smiles shareholders with these shares, but the proposal was unfortunately rejected.
The deal would be paid with Gol shares and an amount of cash which is not mentioned yet. Shareholders had criticized the structure because holders of the new Gol stock would only hold non-voting shares in the airline and in the mileage company.
Analysts at XP Investment said the B3 rejection complicates the proposed Gol reorganization, but said a presidential decree allowing foreign ownership of Brazilian airlines may present “new alternatives” for Gol to proceed with the intended takeover.
Analysts at Itaú BBA said investors may view the announcement as a positive for Smiles shareholders. Analysts said that permission by the Brazilian government would allow Gol to negotiate other options, and potentially ways to fund the takeover of the subsidiary. This transaction was announced in October, Smiles shares have fallen 15% and Gol stock has jumped almost 75%. In the first day, Smiles shares fell 40%.
In a securities filing, Gol also said it would weigh options considering the presidential decree allowing foreign companies to own up to 100 % of Brazilian airlines. Until last week, foreign investors could own up to 20% of a Brazilian airline. Two U.S.-based carriers already have a foothold in Brazil. Delta Airlines Incowns 10% of Gol and United Continental Holdings Incowns 8% of rival Azul.
GOL, it is created on January 15, 2001 and itschief office is located in Sao Paulo Brazil, it is the major name in Brazil Aviation companies. The company is headed by Constantino de Oliveira Junior, who is the heir of the golden mining group which is one of the largest passenger transport group of Brazils.
The company is started with the concept of low fare, but unfortunately was unsuccessful to stick with the concept for longer, Prices of the GOL airlines are equivalent or even higher as compare to other major airlines of Brazil. But still GOL airline acquireshuge part in Brazilian aviation market.
News Source: reuters