Alitalia board approves Air France-KLM takeover deal

(AFP) - The board of Italian airline Alitalia early Sunday approved a formal takeover offer put forward by Air France-KLM after a marathon meeting, the group announced in a communique.

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 in mid-morning Saturday and did not wind up until the release of a press statement at 0125 GMT Sunday.

"Alitalia's board of management deliberated unanimously" and decided to "accept the offer by Air France-KLM and to conclude the said contract," the statement said.

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 exchange 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 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, in relation to the market price on March 14."

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 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.

Once the offer was concretized, Alitalia would have to "deliberate a capital increase of one billion euros to offer as an option to all the shareholders, of an amount to be defined, entirely guaranteed by Air France-KLM."

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 282 million euros at the end of January.

Air France-KLM issued a statement in Paris welcoming the go-ahead by the Alitalia board.