Essential Fact

Mr. Fernando Coloma Correa
Superintendent
Superintendence of Securities and Insurances
Av. Libertador Bernardo O´Higgins 1449

 

Dear Mr. Superintendent:

As established in Article 9 and in Article 10, paragraph 2, of the Securities Market Law (Ley de Mercado de Valores), and in General Regulation No. 30, (Norma de Carácter General N° 30), being duly empowered, I hereby report the following ESSENTIAL FACT regarding LAN Airlines S.A. (“LAN”), Securities Registry No. 306:

  1. By means of Essential Fact dated December 21, 2011, it was reported that  shareholders meetings were held and approved the merger of LAN with Sister Holdco S.A. (“Sister Holdco”) and Holdco II S.A. (“Holdco II”), two companies specially incorporated for purposes of the proposed combination between LAN and TAM S.A. (“TAM”). If Holdco II successfully completed an exchange offer for the TAM shares (including those represented by American Depositary Shares – ADSs – of TAM), both Sister Holdco and Holdco II would be absorbed by LAN (the “Mergers”), with LAN continuing as the surviving entity. Prior to the Mergers, Sister Holdco would hold the TAM shares contributed by the controlling shareholders of TAM, and Holdco II would hold the TAM shares and ADSs acquired pursuant to the exchange offer.
  2. By means of Essential Fact dated May 10, 2012, it was reported that Holdco II and LAN had initiated in the Federal Republic of Brazil (“Brazil”) and in the United States of America (“USA”) an exchange offer (the “Exchange Offer”) for all outstanding TAM  shares (including those represented by TAM ADSs) other than those held by the controlling shareholders of TAM, for Holdco II shares, and ultimately, for LAN shares (the latter being the  legal successor of Holdco II due to the effectiveness of the Mergers), in the form of Brazilian Depositary Receipts - BDRs - in Brazil, and American Depositary Receipts - ADRs – in the USA.
  3. The Exchange Offer was subject to minimum conditions of acceptance for its success and to certain other conditions. In particular, there were established (i) the squeeze-out condition, as a result of which TAM would be able to mandatorily redeem all of the TAM shares not tendered in the Exchange Offer or contributed by the controlling shareholders of TAM; and (ii) the delisting condition, as a result of which TAM would no longer be a registered public company in Brazil.
  4. According to Brazilian law, for the delisting condition to be met, more than 2/3 of the total TAM shares participating in the Exchange Offer shall have agreed with the deregistration of TAM as a public company in Brazil.
  5. On June 12, 2012, LAN waived the squeeze-out condition, which was informed by means of an Essential Fact on that same date. As a result of this waiver, according to Brazilian law, the term of the Exchange Offer was extended for 10 calendar days, and a new date for the auction in BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros was scheduled for June 22, 2012 at 9:00 a.m., Santiago and New York time (10:00 a.m., Sao Paulo time).
  6. Prior to the expiration of the Exchange Offer, 99.9% of the TAM shares that participated in the Exchange Offer agreed with the deregistration of TAM as a public company in Brazil, thereby satisfying the delisting condition.  For information purposes, the TAM shares tendered in the Exchange Offer together with those contributed by the controlling shareholders of TAM represent 95.9% of TAM shares in circulation.
  7. Based on the foregoing and the satisfaction of the other conditions to the completion of the Exchange Offer, the auction took place in BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros today, at 9:00 a.m., Santiago and New York time (10:00 a.m., Sao Paulo time).
  8. Also, and following the steps provided in the transaction, on this same date LAN, Sister Holdco and Holdco II will execute the deed evidencing the Mergers, pursuant to which the outstanding Sister Holdco and Holdco II shares are exchanged for LAN shares, at the rate of 0.9 shares of LAN for each one of  such shares:

Sister Holdco:

Shareholder

Sister Holdco Shares

LAN Shares Issued in Merger

Note

TEP Chile S.A.

72,837,861

65,554,074

Evidencing the direct and indirect contribution of 72,837,860 shares of TAM by the controlling shareholders of TAM

Nominal Shareholder

1

1

 

Total:

72,837,862

65,554,075

 

Holdco II:

Shareholder

Holdco II Shares

LAN Shares Issued in Merger

Note

Itaú Corretora de Valores S.A.

29,723,889

26,751,500
in the form of BDRs of LAN

Evidencing the contribution of 29,723,889 shares of TAM as a result of the Exchange Offer

JPMorgan Chase Bank, N.A.

47,588,095

42,829,285,
in the form of ADRs of LAN

Evidencing the contribution of 47,588,095 shares of TAM (in the form of ADSs) as a result of the Exchange Offer

Nominal Shareholder

1

1

 

LAN

1

--

Share is cancelled

Total:

77,311,986

69,580,786

 

8. The share exchange process will be automatically executed in the LAN’s shareholders registry on June 22, 2012, and settlement of the Exchange Offer will occur with the delivery abroad to the shareholders of TAM that accepted the Exchange Offer of the corresponding ADRs and BDRs of LAN on June 27, 2012.

9. Finally, on this date (i) LAN changes its name to “LATAM Airlines Group S.A.”, notwithstanding that it may also continue to do business under the trade names “LATAM Airlines”, “LATAM Airlines Group”, “LATAM Group”, “LAN Airlines”, “LAN Group” and/or “LAN”; and (ii) the shareholders agreements  with respect  to LAN, Holdco I S.A., and TAM and its subsidiaries referred to in the Material Fact dated January 19, 2011, become effective.

10. Attached you will find the relevant fact that is filed today Brazil.

 

Yours sincerely,

           
Alejandro de la Fuente Goic
Vice-President of Finance

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