Abra Group and Azul Sign Non-Binding MoU to Explore Business Combination in Brazil
Gol is not a direct party to the MoU, but its restructuring under Chapter 11 bankruptcy proceedings in the United States is a critical element in the proposed transaction.
Abra Group and Azul have signed a non-binding Memorandum of Understanding (MoU) to explore a potential business combination, aiming to enhance connectivity within Brazil and strengthen its links to international destinations. This initial agreement marks a significant step towards consolidating the Brazilian aviation market while preserving the distinct operational identities of Azul and Gol Linhas Aéreas.
The MoU outlines the intention to merge Azul and Gol under a single corporate structure, creating a "Combined Company." While Gol is not a direct party to the MoU, its restructuring under Chapter 11 bankruptcy proceedings in the United States is a critical element in the proposed transaction. Abra Group, the majority investor in Gol and Avianca, is positioned to play a central role in this potential merger, leveraging its control of Gol following the airline's court-supervised reorganization.
The combination would see Azul and Gol maintain their separate brands and operating certificates, with an expanded network encompassing over 200 domestic and international destinations. The companies plan to align their complementary fleets and routes, which currently overlap on only 10% of their operations, to increase efficiencies and reduce costs.
Transaction Structure and Governance
The MoU envisions a multi-step process:
- Gol will undergo a recapitalization through a court-approved plan of reorganization, issuing new equity to its creditors.
- The Combined Company will convert outstanding preferred shares into common shares and be publicly listed on Brazil's Novo Mercado segment of B3 and the New York Stock Exchange (NYSE).
- The merger will integrate Azul and Gol, either with Azul as a subsidiary of Gol or vice versa, depending on the finalized structure.
Governance is a key focus of the agreement. For an initial three-year period, leadership will be shared: Abra Group will appoint the Chair of the Combined Company’s board, while Azul shareholders will designate the Chief Executive Officer. The board will consist of nine members, evenly split between Abra Group, Azul shareholders, and independent directors selected by both parties.
Decisions on critical corporate actions, such as equity issuance, significant financial transactions, or changes to the Combined Company’s bylaws, will require a supermajority vote from the board, ensuring shared control and robust oversight.
Financial Stability and Regulatory Oversight
One of the MoU's central objectives is ensuring the financial health of the Combined Company. The agreement stipulates that the merged entity’s net leverage will not exceed Gol’s leverage immediately before the transaction. The closing is contingent on Gol successfully exiting Chapter 11 proceedings and meeting its restructuring goals, as well as securing necessary regulatory approvals from Brazilian authorities, including the Administrative Council for Economic Defense (CADE) and the National Civil Aviation Agency (ANAC).
The parties also emphasize the preservation of Azul and Gol’s individual brands and operational independence post-merger, signaling a strategic approach to maintaining market diversity.
The potential combination reflects Abra Group’s strategy to strengthen its presence in the Brazilian aviation market while enhancing its global network. Manuel Irarrazaval, Abra Group’s Chief Financial Officer, stated: “This is an important opportunity to create a more competitive and resilient player in global aviation. Our goal is to increase democratization and connectivity while supporting Gol’s restructuring efforts.”
Gol’s emergence from Chapter 11 is expected to position it as a well-capitalized standalone entity, ready to integrate into the Combined Company. Abra Group’s existing portfolio, which includes Avianca and investments in Wamos Air and Chile’s Sky Airline, complements this vision, consolidating a robust network of 300 aircraft and operations spanning 25 countries.
Next Steps and Challenges
While the MoU is non-binding, it sets the stage for further negotiations and due diligence. The final transaction will require definitive agreements, regulatory approvals, and compliance with market standards, including listing requirements for the Combined Company.
Abra Group and Azul stress that the MoU does not alter their current operations. Instead, it reflects an exploratory phase aimed at assessing the feasibility and benefits of the proposed transaction.
If successful, the merger could redefine Brazil’s aviation landscape, combining the strengths of Azul and Gol to deliver enhanced services and expanded connectivity for passengers while preserving the distinct identities of both airlines.
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