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Air France Said to Reach Accord to Buy Alitalia Stake


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By Laurence Frost and Andrea Rothman


Jan. 7 (Bloomberg) -- Air France-KLM Group negotiators reached an agreement to buy 25 percent of Alitalia SpA, beating out rival bidder Deutsche Lufthansa AG, three people with knowledge of the matter said.


The proposal must still be approved by the companies’ boards, the people said. Air France has agreed to pay slightly more than 300 million euros ($411 million) for the stake in Rome-based Alitalia, according to one of the people.


The boards of Paris-based Air France and Alitalia, which is controlled by investment group CAI, will meet on Jan. 9 to vote on the transaction, according to the people, who asked not to be identified because the deal is confidential. Details should be announced three days later, they said.


“We continue to work on the matter but we’re not discussing dates,” Air France spokesman Cedric Leurquin said today by telephone. Alitalia declined to comment.


CAI Chairman Roberto Colaninno said Dec. 12 he aimed to announce a foreign partner for Alitalia by the end of the year. Talks were extended in order to resolve questions including how Air France and CAI would split savings from deeper cooperation, as well as governance issues for the new carrier, which will retain the Alitalia name, one of the people said.


The new airline will combine Air France-KLM’s Italian operations with Alitalia and Air One SpA, the country’s second- biggest carrier. Air One was merged with its larger domestic rival last month in CAI’s government-backed rescue, which also offloaded Alitalia’s least-profitable assets along with most of its debt and almost half the workforce.


As partners in the SkyTeam airline alliance, Alitalia and Air France already share services on some routes between Italy and France.


Lufthansa Challenge


Lufthansa, which is buying up smaller carriers in a challenge to Air France’s position as Europe’s No. 1 airline, said in November it still hoped to win the contest for Alitalia. Italian Prime Minister Silvio Berlusconi and his Northern League coalition partners have urged CAI to choose the German company to safeguard the future of Milan’s Malpensa airport.


Berlusconi is scheduled to discuss Alitalia and its choice of international partner tomorrow with Northern League party founder Umberto Bossi.


The French government, which owns 15.7% percent of Air France-KLM, according to Bloomberg data, sees “strong potential” in a tie-up with Alitalia, Transport Minister Dominique Bussereau said today. “Things appear to be going well, based on what I’ve heard,” he added.



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