(Adds share prices, details on analyst reports)
SAO PAULO, Dec 17 (Reuters) - Shares in Gol Linhas Aereas Inteligentes, Brazil’s largest airline, recovered after early losses on Monday after the company said it would have to review the proposed takeover of its mileage subsidiary Smiles Fidelidade SA.
Shares in Gol were up 2.3 percent and shares in Smiles 3.5 percent after Gol said the Brazilian stock exchange decided the structure proposed by Gol to take over its subsidiary could not be approved.
Gol wanted to list its shares in a segment of the stock exchange with increased governance rules, where Smiles is already listed, and pay Smiles shareholders with these shares, but the proposal was rejected.
The deal would be paid with Gol shares and an unspecified amount of cash. Shareholders had criticized the structure because holders of the new Gol stock would only hold non-voting shares in the airline and in the mileage company.
Analysts at XP Investimentos said the B3 rejection complicates the proposed Gol reorganization, but said a presidential decree allowing foreign ownership of Brazilian airlines may present “new alternatives” for Gol to proceed with the intended takeover.
Analysts at Itau BBA said investors may view the announcement as a positive for Smiles shareholders. Analysts said that permission by the Brazilian government would allow Gol to negotiate other options, and potentially ways to fund the take over of the subsidiary.
Since the transaction was announced in October, Smiles shares have fallen 15 percent and Gol stock has jumped almost 75 percent. In the first day, Smiles shares fell 40 percent.
In a securities filing, Gol also said it would weigh options considering the presidential decree allowing foreign companies to own up to 100 percent of Brazilian airlines. Until last week, foreign investors could own up to 20 percent of a Brazilian airline. Two U.S.-based carriers already have a foothold in Brazil.
Delta Airlines Inc owns 10 percent of Gol and United Continental Holdings Inc owns 8 percent of rival Azul . (Reporting by Paula Laier and Marcelo Rochabrun; Editing by Jason Neely, Jeffrey Benkoe and Jonathan Oatis)