TAM S.A. (ADR) (NYSE:TAM)

CAPS Rating: 2 out of 5

The Company provides scheduled air transportation in both the domestic market and the international market through its operating subsidiaries TAM Linhas Aereas and TAM Mercosur.

Recs

2
Player Avatar Schmacko (79.83) Submitted: 8/26/2010 11:07:49 AM : Outperform Start Price: $18.52 TAM Score: +12.62

TAM is in the process of being bought out by Chile's mo' better LAN airlines. If the deal is approved (and it probably will be) holders of TAM will receive .9 shares of LAN shares (renamed LATAM)for each share of TAM they hold. Since both LFL and TAM are ADRs it's the math is a little tricky but TAM currently trades at a discount to that .9 LFL price and as LFL goes up (which I think it will) TAM should go up accordingly. I wouldn't pick this stock if it weren't for the merger possibility. I own shares of LFL in RL but not TAM.

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Member Avatar Schmacko (79.83) Submitted: 3/30/2011 1:02:03 PM
Recs: 0

Chile's anti-trust court has delayed the merger. I still think it's going to go through. The projections now are if approved it wouldn't happen until 4th quarter 2011 or early next year though. TAM's price has fallen harder than LFL's price on the delay. I think it now trade's at something like a 15% discount of the LAN exchange price based on LFL's current ADR price. This creates a decent arbitrage opportunity. I don't necessarily know how good it is as a CAPs pick anymore though.

Member Avatar Schmacko (79.83) Submitted: 9/21/2011 1:34:39 PM
Recs: 0

Merger has passed Chile's anti-trust court with the provisions that the combined company would have to give up some slots on the Sao Paolo-Santiago route and renounce participation in one of two global alliances. The companies now have to weigh if the restrictions are worth it, and in my mind they are. The combined company will still save a good amount of money in synergy become the largest airline in South America with a pretty large footprint and the 10th largest airline in the world. I would think the combined airline would also have more leverage in bargaining with suppliers such as airbus and boeing.

Tam still trades at roughly a 13% discount to the exchange price if Lan prices stay flat. Am now looking at establishing a position in TAM. I already own shares of LFL.

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