Flying south

17 March 2008 By Pierre Briancon

The FrancoDutch carrier s offer for its Italian rival values it at a fifth of its market capitalisation. That s generous, considering Alitalia is nearly bankrupt. The deal depends on approval from the unions and the next Italian government. These are tricky obstacles.

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Air FranceKLM, the world's largest airline, said on March 15 that the board of Italia, the Italian carrier, had accepted the terms of its binding and conditional offer to acquire the company.

Air France said it was ready to buy 100% of Alitalia's equity on the basis of 1 Air France share for 160 Alitalia shares. It also said it would buy E608m worth of Alitalia convertibles at their market value of E0.3145.

Based on Friday's closing price, the offer values Alitalia at around E0.10 a share a steep discount to their E0.53 price.

Air France also said it would fully guarantee a E1bn capital increase it said would be open to all Alitalia shareholders.

The FrancoDutch company said its offer was conditioned on the Italian government's and Alitalia's unions' approval.

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