Alitalia accepts Air France-KLM bid

Alitalia's board on Sunday unanimously accepted Air France-KLM's bid valued at $1.1 billion in a move to save the struggling national carrier.

The Air France-KLM offer values the airline at $216 million, far less than expected, based on a share swap of one Air France share for every 160 Alitalia shares. The Franco-Dutch carrier also said it would pay $946 million for convertible shares.

The Franco-Dutch carrier said it would inject $1.56 billion in capital once the deal is complete.

Alitalia's board issued a statement accepting the offer after a marathon meeting that went some 16 hours into early Sunday. Air France said it was "happy" with Alitalia's decision.

Air France-KLM wants the deal to be backed by unions, which have been critical of the planned 1,600 job cuts. The offer also must be approved by the Italian government, which is selling its 50 percent share, as well as the stock market regulator and EU competition authorities.

Air France-KLM said it expected to have necessary government and regulatory approvals within the first half of 2008. During the week, Italy's Cabinet will meet to discuss the offer, and Air France-KLM Chairman Jean-Cyril Spinetta is expected to fly to Rome to meet with Alitalia's labor unions.

Air France-KLM said it plans to relaunch Alitalia with an industrial and restructuring plan that will allow the Italian carrier "to rediscover the means of its development and to consolidate its status as a national leader."

Alitalia will maintain its national identity within the group and an Italian will have a seat on Air France-KLM's board, the carrier said in a statement.

The Franco-Dutch carrier said it expected to achieve operational profits in 2009.

Alitalia has been losing $1.56 million a day, and its cash reserves were down to just $439 million at the end of January, nearly a 25 percent drop from a month earlier.

The outgoing center-left government of Romano Prodi has been trying for more than a year to sell Alitalia. Its decision to enter exclusive talks with Air France-KLM has been met with opposition by unions concerned about jobs and backers of Milan's Malpensa airport, which would lose its status as a hub. Air France intends to maintain just one hub for Alitalia, at Rome's Leonardo da Vinci airport.

Opposition leader Silvio Berlusconi, who is favored to win national elections next month, recently said he could accept an Air France-KLM purchase of Alitalia if the Italian carrier maintains its national identity, backing down from his opposition to the deal.

Under the deal, Air France-KLM would launch a public offer for 100 percent Alitalia, not just for the government's stake. The offer values each Alitalia share at 10 euro cents, about one fifth of Friday's closing price of 84 cents.