RIO DE JANEIRO, Brazil (Reuters) -- Brazilian low-cost airline Gol Linhas Aereas Inteligentes agreed to buy rival carrier Nova Varig for around $275 million on Wednesday, making it the second time Varig changes hands in less than a year.
The deal with local firm VarigLog -- Varig's former logistics unit -- and Volo, a group of investors including U.S. investment fund Matlin Patterson, consists of a $98 million cash payment and some 6.1 million preferred shares issued by Gol, Gol said in a statement.
Gol, Brazil's No. 2 air carrier, will also assume $45 million in debentures, which will raise the value of the deal to $320 million. Nova Varig, or VRG, was bought by VarigLog and Volo in mid-2006 for $24 million.
Once Latin America's biggest airline and Brazil's flagship carrier, Varig has been reduced to a shadow of its former self over the past couple of years due to mounting debts and high leasing costs.
At one point it had a debt of over $3 billion.
In 2005 it requested bankruptcy protection and was split up and sold off at an auction the following year.
With only 17 aircraft and a handful of routes, Nova Varig is now fourth-placed on the Brazilian aviation market.
The buyer will operate the airline under its old Varig brand and offer differentiated services incorporating Gol's low-cost business model. Gol and Varig will be managed as independent companies.
The acquisition will give Gol, which flies to several international destinations in South America, access to Nova Varig's routes to the United States and Europe.
It also will get Nova Varig's sought after and profitable slots at Sao Paulo's airport for domestic flights, where there is limited space and business travelers pay premiums for flights.
Gol emerged as a buyer for Varig after Chile's LAN said in January it extended a $17.1 million credit line to Varig and that it would become a minority shareholder in the carrier.
Copyright 2007 Reuters. All rights reserved.This material may not be published, broadcast, rewritten, or redistributed.
The deal with local firm VarigLog -- Varig's former logistics unit -- and Volo, a group of investors including U.S. investment fund Matlin Patterson, consists of a $98 million cash payment and some 6.1 million preferred shares issued by Gol, Gol said in a statement.
Gol, Brazil's No. 2 air carrier, will also assume $45 million in debentures, which will raise the value of the deal to $320 million. Nova Varig, or VRG, was bought by VarigLog and Volo in mid-2006 for $24 million.
Once Latin America's biggest airline and Brazil's flagship carrier, Varig has been reduced to a shadow of its former self over the past couple of years due to mounting debts and high leasing costs.
At one point it had a debt of over $3 billion.
In 2005 it requested bankruptcy protection and was split up and sold off at an auction the following year.
With only 17 aircraft and a handful of routes, Nova Varig is now fourth-placed on the Brazilian aviation market.
The buyer will operate the airline under its old Varig brand and offer differentiated services incorporating Gol's low-cost business model. Gol and Varig will be managed as independent companies.
The acquisition will give Gol, which flies to several international destinations in South America, access to Nova Varig's routes to the United States and Europe.
It also will get Nova Varig's sought after and profitable slots at Sao Paulo's airport for domestic flights, where there is limited space and business travelers pay premiums for flights.
Gol emerged as a buyer for Varig after Chile's LAN said in January it extended a $17.1 million credit line to Varig and that it would become a minority shareholder in the carrier.
Copyright 2007 Reuters. All rights reserved.This material may not be published, broadcast, rewritten, or redistributed.
