ROME/MILAN (Reuters) - Initial offers from Air France (AIRF.PA) and local rival Air One for state-owned Alitalia AZPIa.MI were so far below market price that shares of the ailing carrier plunged on Friday to a record low.
The all-Italian bid from Air One, favored by the company’s combative unions eager to keep staff cuts low, was of just 1 euro cent a share, a source close to the talks said.
Air France-KLM (AIRF.PA), one of the world’s largest airline, offered 35 euro cents per share, the source said — and even that only values the Italian flag carrier at about 485 million euros ($704.8 million), less than half what the market thought it was worth on Thursday.
“The offer by Air One is at 1 cent per share,” the source told Reuters, adding that Air France’s offer is at 35 euro cents per share.
Alitalia said in a statement the bid prices were “not full and complete,” adding that as they pertained to non-binding offers, they were “a mere first reference to value.”
Shares in the loss-making airline, which has been hawked by the government for a year, tumbled, and trading had to be halted several times. Shares fell as much as 30 percent before recouping some losses to close 13 percent down at 0.76 euro amid expectations that the two prices could only be increased.
Alitalia said prices are only part of the story.
In a separate statement requested by the stock market regulator, the carrier said it will consider the financial resources of the bidders and also their ability to create a single hub to rival other large European airports.
Both these criteria suggest the Italian airline favors the financial clout and strategic savvy of Air France-KLM, which wants to ditch Alitalia’s twin hub strategy and focus on Rome.
Alitalia’s Chairman Maurizio Prato has already spoken favorably of the French bid, but that view faces domestic pressure to keep the flagship carrier in Italian hands.
Italy’s main employers’ body, its largest unions and several politicians have come out in favor of Air One, whose bid is backed by Italy’s biggest retail bank, Intesa Sanpaolo
French President Nicolas Sarkozy said he could talk about Air France’s offer, flushed out only last week after months of speculation, with Italian Prime Minister Romano Prodi when he visits Rome on Thursday.
Air France has been Alitalia’s commercial partner since 2001, but it snubbed a government auction earlier this year, saying the Italian company was in too bad shape and terms were too tough.
Unions, worried over potential heavy job cuts under both offers, threatened on Friday to strike unless the government consulted them before choosing a buyer and told them what the bidders’ plans were.
Roberto Formigoni, a key politician in the region where Alitalia’s Milan hub is located, also called on the government to give details of the plans.
“The industrial plan is the most important part of the valuation; it does not matter who offers a cent more or a cent less. It is all about the commitment of the company presenting strategy,” he said.
Alitalia, whose main attraction for buyers is its dominance of the route from financial capital Milan to Rome, has put off a final decision on the offers to December 18 after the government failed to pick one at a long meeting on Wednesday.
Prodi said on Thursday there were “clearly ... different instinctive opinions” among his cabinet over the best partner.
His fragile center-left coalition government put Alitalia up for sale at the end of last year, but a first auction flopped in July when all the bidders pulled out.
Time is now running out for the government to find a survival solution for the airline, which loses a million euros a day and has said it would have funds for a year if it sold assets.
Rome cannot give any more money to Alitalia, which already is burdened by 1.2 billion euros of debt, after a ban from the European Union on further state aid.
Additional reporting by Alberto Sisto; Writing by Jo Winterbottom and Gavin Jones; Editing by Gerald E. McCormick and David Cowell