Alitalia agrees to be bought by Air France-KLM

ROME, March 16 (Reuters) - Struggling Italian carrier Alitalia (AZPIa.MI: Quote, Profile, Research, Stock Buzz) on Sunday agreed to be bought by larger rival Air France-KLM (AIRF.PA: Quote, Profile, Research, Stock Buzz), but for a far smaller sum than expected.

Air France-KLM offered one share for every 160 shares of Alitalia as part of its binding offer, valuing the airline at just 138 million euros -- an 81 percent discount to current share prices.

Reports had suggested Air France-KLM would offer one share for every 70 of Alitalia's -- valuing the airline at about 317 million euros.

State-controlled Alitalia is rushing to wrap up a sale to the Franco-Dutch carrier before its dwindling cash reserves dry up.

(Reporting by Deepa Babington and Alberto Sisto, editing by Jacqueline Wong)