Latam Airlines spikes 33% after Delta investment (LTM, DAL)

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    • Delta Airlines announced a plan to purchase a 20% stake in Latam Airlines for $1.9 billion on Thursday.
    • The company will also invest $350 million to “support the establishment of the strategic partnership,” bringing the total deal size to $2.25 billion.
    • Shares of Latam surged as much as 33% on the news.
    • The move “shows the strength of the company’s platform in the Latin American market,” Pedro Mariani, a research analyst at Bank of America Merrill Lynch, wrote in a client note.
    • Watch Latam Airlines trade live on Markets Insider.

    Latam Airlines soared as much as 33% on Friday after Delta Airlines agreed to a $2.25 billion deal with the company, which is South America’s biggest carrier.

    Delta will buy a 20% stake in LATAM for $1.9 billion, and also invest another $350 million to “support the establishment of the strategic partnership,” according to a company statement.

    Shares of Latam Airlines, an air carrier based in Chile, soared as much as 35% on the news. Partnering with Delta will boost Latam, industry watchers say. Delta shares edged higher on the news. 

    “It’s hard to envision how Delta’s influence over LATAM would not afford significant benefits, in our view,” wrote Jamie Baker, US airlines analyst at JPMorgan. 

    The deal with Latam, the biggest airline in South America, is Delta’s largest since it merged with Northwest Airlines over a decade ago. It will also expand Delta’s reach to the region, since Latam flies to dozens of destinations in Latin America.

    Together, the two partners will hold the leading position in five of six top markets in Latin America, according JPMorgan, which upgraded shares to “neutral” from “underweight” and raised its price target to $14 from $10. 

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    Bank of America Merrill Lynch Pedro Mariani echoed the positive sentiment, saying the transaction is a net positive for Latam. While unexpected, the move “shows the strength of the company’s platform in the Latin American market,” he said.

    Of the 17 analysts that cover the company, four say to buy, 12 say hold, and only one says to sell shares now, according to Bloomberg data. The average price target is $11.72. 

    Latam shares are now up roughly 15% year-to-date. 

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