United Airlines May Acquire Avianca
Avianca finds itself in a vulnerable position thanks to a recent default by its controlling shareholder. The default gives United Airlines a chance to take majority control of the growing Colombian carrier.
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May 14, 2019 - by Matthew for liveandletsfly.boardingarea.com
Avianca is majority controlled by BRW Aviation, a subsidiary of Synergy Group (a South American conglomerate owned by Germán Efromovich). BRW Aviation borrowed $456 million from United in November 2018. This loan was secured by 516 million shares of Avianca common stock.
But now BRW Aviation has defaulted on its United loan (due primarily to problems in Brazil).
That gives United the opportunity, if it so chooses, to pursue a breach of contract action again BRW Aviation. Down the road, it could give United control over the Avaianca shares. It is a particularly interesting time, because the default comes as Avianca's stock prices is depressed.
Many analysts, in fact, view the company as greatly undervalued versus current stock price. Thus, United may not only have the right to acquire a majority of Avianca, but may be "buying low" and securing a particularly attractive deal.
Avianca is not party to the loan between BRW Aviation and United Airlines. Instead, it finds itself in the middle,...