Brazil airline Gol cancels proposed takeover of Smiles unit

Shares in Gol Linhas Aereas Inteligentes, Brazil’s largest airline, recovered after early losses on Monday after the company said it would have to review the proposed takeover of its mileage subsidiary Smiles Fidelidade. Shares in Gol were up 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 rejected. The deal would be paid with Gol shares and an unspecified amount of cash. 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 Investimentos 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. 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.<br/>