MILAN/ROME (Reuters) - Italy’s outgoing government approved Alitalia’s AZPIa.MI takeover by Air France-KLM on Monday, but the carrier’s strike-prone unions attacked the deal and the European Commission insisted on being consulted.
Shares in Alitalia closed down nearly 27 percent to 0.39 euros. Air France-KLM (AIRF.PA) offered one share for every 160 shares of Alitalia, valuing it at only 0.10 euros a share, or 138 million euros ($183.8 million), and will buy back its bonds.
The takeover would end the 60-year independence of a global Italian brand. But it would also avoid the airline going broke as its cash reserves quickly dry up.
Alitalia does not have any alternative to Air France-KLM’s offer, Italian economy ministry undersecretary Alfiero Grandi said ahead of the emergency cabinet meeting on Monday that gave the green light to the deal.
The sale of the government’s 49 percent stake in Alitalia, whose workforce of about 19,000 is highly unionised, is a hot issue ahead of the general election in Italy on April 13-14.
“Air France-KLM is Alitalia’s only alternative to bankruptcy,” said Alessandro Frigerio, a fund manager with RMJ in Milan. “The price offered by Air France reflects the difficulties of dealing with Alitalia’s stake holders, including the government and the employees.”
The offer price is an 81 percent discount to Friday’s close and was backed by Alitalia management at the weekend. The French firm attached conditions including approval from unions and the government and a 300 million euro bridge loan from Italy’s Treasury.
Brussels, which has blocked Rome from giving further state aid to the airline, said it would be “prudent” for Italy to work with European Commission on the deal, while any loan would have to be given on the same conditions a private investor would set.
Caretaker Economy Minister Tommaso Padoa-Schioppa -- whose ministry oversees privatisations -- told ministers that he would inform Alitalia of the decision to tender the Treasury’s stake when the public offer is launched, a cabinet statement said.
But the obligation to do so would not be binding in the event other suitors launch a public bid with better terms.
The Italian Treasury earlier posted on its Web site Alitalia’s letter detailing the offer, in case other companies want to come forward with “better public offers.”
The government’s approval came despite the objections of one cabinet minister and angry noises by Alitalia’s unions.
“This is a proposal aimed only at creating profit for the bidder, that is harmful for the company, for the workers and for the country,” said Infrastructure Minister Antonio Di Pietro, a member of the center-left government which collapsed in January but remains in a caretaker role until the election.
CGIL union leader Guglielmo Epifani advised Air France to leave “room for negotiations,” saying “take-it-or-leave-it has never been the best tactic with unions.”
The ANPAC union representing pilots that was earlier in favor of an alliance with Air France-KLM changed its mind after seeing the deal included major cuts at Alitalia’s cargo unit.
Unions were due to meet Alitalia’s management on Tuesday, talks which were expected to be attended by Air France-KLM CEO Jean Cyril Spinetta, who arrived in Rome on Monday night.
Some opposition politicians compared the agreement to the battle of Caporetto, Italy’s worst military defeat during World War One and a lingering national symbol of collapse.
“It’s a real Caporetto of the government and of the administrators it named,” Lombardy region President Roberto Formigoni said, according to La Repubblica newspaper.
Formigoni is one of many northern Italian politicians crying foul over Air France-KLM’s plans to scale back Alitalia’s operations at Malpensa, Milan’s hub.
Opposition leader Silvio Berlusconi, ahead in opinion polls, has criticized the sale to Alitalia’s long-time partner, saying he favors an Italian solution. It remains to be seen if he will oppose the sale to Air France-KLM should he win the elections.
Additional reporting by Astrid Wendlandt in Paris and Giselda Vagnoni and Phil Stewart in Rome, Editing by Keith Weir, Leslie Gevirtz