Air France KLM eyes full Alitalia acquisition in 2013

Air France KLM (AF KLM) is aiming to buy Alitalia (AZ) in 2013 through a share swap, La Tribune reported. 

However, using shares instead of cash to finance the acquisition will require a rebound of its share price, which is trading at around €4 ($5.27), and a swift execution of  its three-year “transformation plan” to bring the company back to profitability.

AF KLM will announce full-year results Thursday and analysts expect the group to report a net loss. Group debt is around €6.5 billion.

The Franco-Dutch group bought a 25% shareholding in AZ in early 2009, following the restructuring and re-launch of AZ under private ownership . AF KL also obtained an option, subject to certain conditions, to purchase additional shares from 2013.

Acquiring full control of AZ is one of the main concerns of group chairman Jean-Cyril Spinetta, according to the French newspaper. Spinetta is also a board member of the Italian carrier.

AF and KLM used an exchange offer for their merger in 2004. It wants to use the same mechanism for AZ to preserve its limited cash position, but “if the share price remains at its present level, the operation is impossible,” a company source told La Tribune. It added that some analysts are warning that the Italian shareholders probably would prefer cash over shares of a loss-making airline.

Analysts also point to the possibility that the Italian shareholders might turn to Lufthansa (LH), “which does have the means to pay in cash,” or might use the German card to heighten the price. LH competed with AF KLM in 2008 to become the new AZ’s strategic partner/investor and was the preferred choice of then Italian prime minister Silvio Berlusconi.

AZ reported a 2011 net loss of €69 million ($92.9 million), a 58.9% improvement from an €168 million deficit in 2010. Operating loss was reduced from €106 million to €6 million “with a negative margin of 0.17% on revenues, in line with the operating breakeven objective,” the company said in a statement last month.

Article Source : ATW Daily News