ROME — The board of Alitalia after a marathon meeting approved early Sunday 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 in Rome to be elected next month.
The Alitalia board meeting started mid-morning Saturday and did not wind up until the release of a press statement at 0125 GMT Sunday.
“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 as the Italian state holds a 49.9 percent stake in the financially-strapped airline.
Air France-KLM have offered a deal valuing each Alitalia share at just under 10 euro cents, a very low figure given that the shares were quoted on Friday at 0.53 euros.
The deal proposes to swap one of Air France-KLM shares for 160 Alitalia shares, which would give the Italian airline a value of at least 140 million euros (218 million dollars), the statement said.
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 board went on: “The contract is not immediately applicable as it is subject to several suspensive conditions which must all be validated by March 31, 2008.”
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 sold to Air France at bargain price” ran the headline in the daily Il Giornale, owned by the family of former Italian premier Silvio Berlusconi.
Yet economists say the partially state-owned Italian carrier had been plagued by some 20 years of chaotic management.
“Alitalia was never able to be a true business. Politics would never allow the failure of this symbol of the country. That was its main problem,” said Marco Ponti, an economist in Milan specialisiing in transportation.
“Consequently, each change in government brought a change in management and a new strategy never clearly defined,” he 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 14.
Press reports said a decision by the economy ministry could be taken on Monday, while the Italian stock exchange’s control authority Consob and the European Union’s executive Commission would also have to rule on the takeover.
Air France-KLM guaranteed an increase in Alitalia’s capital of one 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 2008-2010 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.
Air France-KLM, Europe’s biggest airline, was born when the French national carrier took over Dutch KLM in May 2004.
It employs 103,000 people and on September 30 had a fleet of 582 airliners serving 240 destinations.
It posted a record operating profit of 1.24 billion euros on sales of 23 billion euros for the fiscal year which ended on March 31 2007, with passenger transport the group’s main activity, accounting for 80 percent of earnings.