(Updating with Italian politicians' reactions)
MILAN, Mar. 17, 2008 (Thomson Financial delivered by Newstex) -- Italian state-owned carrier Alitalia SpA said it has asked for, and expects to receive from the government, a 300 mln eur credit line that it will repay immediately after its planned capital hike.
In a statement overnight, Alitalia said it expects Air France-KLM's (NYSE:AKH WS) (OOTC:AFLYY) offer to acquire the airline to be launched by the end of June.
Yesterday, the board of Alitalia approved Air France's offer, which is subject to a series of conditions including obtaining the credit line, which will have to be fulfilled by the end of the month.
After these conditions are met, and if in the meantime no 'material adverse change' and other constraints emerge, Air France will launch its bid, which values the state-controlled carrier far below its market price.
Before being launched, the offer will also require EU antitrust clearance.
Air France will offer one share for every 160 Alitalia shares, valuing the company at 139 mln eur, or 0.10 eur per share. This is below Friday's closing price of 0.541 eur and expectations for 0.22-0.23 eur.
In addition, Air France will also bid for 100 pct of the airline's convertible bonds at about 608 mln eur, or 0.3145 eur per bond, in line with Friday's market price, bringing the total potential outlay to 747 mln.
The Italian state, which holds 49.9 pct of Alitalia, will have a 2-3 pct stake in the combined group, reports said.
Following the successful completion of the offers, Alitalia will launch a 1 bln eur rights issue that will be fully guaranteed by Air France.
Italian newspapers said to make Alitalia competitive from 2011, Air France plans to cut Alitalia's passenger capacity by 10 pct, cut its fleet to 137 planes from 185, exit from the cargo segment, and invest 850 mln eur.
According to the reports, Air France plans 1,600 layoffs out of 11,000 people at Alitalia's flight operations AZ Fly and transfer to state holding company 4,500 to 5,100 employees of Alitalia's 49 pct service operations affiliate AZ Servizi.
Trade union approval is among the conditions to validate Air France's offer.
Newspapers said Air France's and Alitalia's heads Jean-Cyril Spinetta and Maurizio Prato will meet tomorrow with Alitalia's nine trade unions.
Newspaper said the unions were very critical towards Air France's offer, with pilots union ANPAC clearly saying it will not approve the offer unless Air France's plans for Alitalia are changed.
Newspapers said members of the centre-right coalition, which is ahead in latest opinion polls for April's 13-14 general election, are divided over Air France's proposal.
Ex-prime minster Silvio Berlusconi, who leads the centre-right People of Freedom coalition, declined to comment, daily La Repubblica said.
Among other centre-right politicians, Alleanza Nazionale leader Gianfranco Fini said he is positive towards Air France pending decisions by trade unions, while representatives for the Northern League are against, the paper added.
Politicians of the centre-left Democratic Party are reportedly favourable to Air France's offer.
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news source : http://money.cnn.com/news/newsfeeds/articles/newstex/AFX-0013-23811967.htm
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