FACTBOX-Alitalia's sputtering sale process

Aug 27 (Reuters) - Italian investors plan to pump 1 billion euros into a restructured Alitalia AZPIa.MI, which is then expected to resume the hunt for a foreign partner, a source familiar with the matter has said.

The latest rescue plan for the stricken airline is expected to split the stricken airline into two and seek bankruptcy protection for its troubled units after a fruitless 20-month hunt for a suitor.

A timeline of Alitalia's sputtering sale process follows:

INITIAL AUCTION

The previous centre-left government announced it was putting its Alitalia stake up for sale in late December 2006.

Rome owns 49.9 percent of the carrier and sought bids for at least 39.9 percent of the company, which would automatically trigger a full bid under Italian takeover law.

There were 11 bidders initially, but the auction collapsed in July 2007 as the number shrank gradually, until the only remaining bidder -- smaller rival Air One -- also pulled out.

SECOND TRY

Alitalia then drew up its own list of six potential partners to pursue, and Franco-Dutch carrier Air France-KLM (AIRF.PA) and Air One put in non-binding bids to buy the carrier.

Italy's then centre-left government overlooked massive lobbying by unions and regional politicians to pick Air France-KLM for exclusive talks.

The two airlines agreed on a takeover that valued Alitalia shares at just 10 euro cents, or $184 million, an 81 percent discount to the price they were trading at the time.

Criticism from Silvio Berlusconi, who was campaigning to become prime minister at the time, and a lawsuit by Milan's airport operator put the deal at risk, and it ultimately fell apart over union opposition.

THIRD TIME LUCKY?

After clinching power in April, Berlusconi began a third attempt to secure Alitalia's future, promising a group of Italian investors would buy the carrier. Normal disclosure requirements on the sale's progress were waived, and Alitalia shares were suspended indefinitely in June.

The government asked bank Intesa Sanpaolo (ISP.MI) to draw up a rescue plan, which is expected to recommend breaking up the carrier into two and seeking bankruptcy protection for its troubled units. Italy will have to modify the existing bankruptcy law to accommodate the move.

For more details on the plan, click on [ID:nLQ215322].

For the latest story on Alitalia's fate, click on [ID:nLR679330]

(Writing by Deepa Babington; Editing by David Cowell)