By Brazil Stock Guide – Brazil’s antitrust tribunal on Wednesday (Feb. 11) unanimously approved United Airlines Holdings Inc.’s (UAL) $100 million investment in Azul SA (AZUL4 BZ), allowing the U.S. carrier to raise its stake in the Brazilian airline to about 8% from roughly 2%.
The Administrative Council for Economic Defense, known as Cade, cleared the transaction without imposing formal remedies but tied the approval to specific assumptions that could trigger a review if not met. The investment is part of Azul’s restructuring process in the United States.
Under the terms presented, United will inject $100 million into Azul and may gain the right to appoint representatives to the Brazilian carrier’s board of directors. Cade stressed that the deal does not authorize a transfer of control.
“In the concrete transaction, we are not authorizing control. If it is established, Cade may review the operation or open a conduct proceeding,” Cade President Gustavo Augusto said in his vote.
The companies committed to an antitrust protocol designed to prevent the exchange of competitively sensitive information. Any increase in United’s stake beyond the parameters reviewed, as well as changes to the governance structure, must be submitted in advance to the regulator. Azul must also inform Cade of any changes to the powers of its Strategic Committee.
The case reached Cade’s tribunal at the request of the Instituto de Pesquisas e Estudos da Sociedade e Consumo (IPSConsumo), after receiving prior approval from the agency’s technical staff. The institute argued that United’s minority interests in both Azul and Abra Group — the holding company that controls Gol Linhas Aéreas Inteligentes SA (GOLL4 BZ) — could create room for sensitive information sharing between competitors.
IPSConsumo also pointed to a similar proposed investment by American Airlines Group Inc. (AAL), which was not submitted jointly for review. Reporting judge Diogo Thomson said he saw no obstacle to analyzing United’s transaction separately.
Augusto added that when Cade reviews any future investment by American Airlines, it will take the previously approved deal into account and may apply stricter scrutiny.
Brazil’s Competition Law No. 12,529 of 2011 allows the tribunal to revisit approvals if they are based on false or misleading information, if agreed obligations are breached, or if the expected benefits are not achieved. Fines for non-compliance range from 60,000 reais to 6 million reais ($).