After a marathon meeting the board of Alitalia early yesterday approved a formal takeover offer put forward by Air France-KLM, placing a very low value on the struggling Italian flag carrier.
The operation is seen as critical to the troubled Italian airline's survival and a key first issue for the new government to be elected next month.
The Alitalia board meeting started mid-morning on Saturday and did not wind up until the release of a press statement at 1:25am yesterday.
PHOTO: AFP
"Alitalia's board of management reached unanimity" and decided to "accept the offer by Air France-KLM and to conclude the said contract," the statement said.
Air France-KLM issued a statement in Paris welcoming the go-ahead by the Alitalia board.
The Franco-Dutch airline on Friday unveiled its formal bid for Alitalia, which it said would be conditional on union support, after eight weeks of negotiations.
Alitalia management was expected to seek the opinion of the economy ministry, which holds a 49.9 percent stake in the financially strapped airline.
Under the deal, Air France-KLM would launch a public swap offer covering 100 percent of Alitalia's shares under which 160 Alitalia shares would be exchanged for one share in Air France, the statement said.
The swap offer valued each Alitalia share at just under 10 euro cents (US$0.15), a very low figure given that the shares were quoted on Friday at 0.53 euros.
Three months ago, when the negotiations were launched between the two groups, there were unconfirmed press reports of an offer of 35 euro cents. Since then shares in the near-bankrupt Alitalia have plunged.
The Italian company also accepted "the public offer of an acquisition of 100 percent of Alitalia convertible bonds, at a unitary price of 0.3145 euro," for a total of 608 million euros.
"The contract is not immediately applicable as it is subject to several suspensive conditions which must all be validated by March 31, 2008," the board said.
The new Alitalia would keep "its Italian identity" as well as its own brand and logo.
About 1,600 jobs out of 11,000 would be lost in the Italian group, the statement said.
Alitalia head Maurizio Prato wanted to convince Air France-KLM to acquire the maintenance and administrative unit AZ Servizi, which employs 8,300 people and is currently controlled by the public holding company Fintecna.
The statement said without going into detail that the new company would "buy back some of the activities currently managed by Alitalia Servizi."
The offer, even with the acceptance of the board, still awaits the reaction of the unions and of the new Italian government that will emerge from elections on April 13 and April 14.
Press reports said a decision by the economy ministry could be taken today, while the Italian stock exchange's control authority Consob and the EU's executive Commission would also have to rule on the takeover.
Air France-KLM guaranteed an increase in Alitalia's capital of 1 billion euros on completion of the deal to offer as an option to all the shareholders.
The board also approved a new three-year plan covering this year through 2010 under which a phase of restructuring and stabilization would be followed by a phase of "relaunch and development from 2010 through the renewing of the fleet."
Alitalia's economic situation is disastrous, with its funds totalling just 282 million euros at the end of January.
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