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Alitalia bids well below market price

Domestic minnow Air One has offered just one euro cent per share, the source told Reuters on Friday.

Air France-KLM has offered 35 euro cents per share -- but 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.

Shares in the loss-making airline, which has been hawked by the government for nearly a year, tumbled and trading was halted several times. By 1343 GMT they were indicated down 26.45 percent at 0.64 euros after a trading low of 0.805 euros.

“The offer by Air One is at one cent per share,” the source told Reuters, adding that Air France’s offer is at 35 euro cents per share.

Both Air France and Air One declined to comment. The offers are non-binding and both can be reviewed.

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.”

The bid from Air One, backed by Italy’s biggest retail bank Intesa Sanpaolo, would be politically expedient as it would leave control in Italian hands while that of Air France-KLM would take the carrier off the government’s hands permanently.

Jobs, strikes, politics

Unions, worried over potential heavy job cuts in 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 based, 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, according to ANSA news agency.

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 Dec. 18 after the government failed to pick one at a long meeting on Wednesday.

Prime Minister Romano Prodi gave a nod to reports of divisions among his cabinet over the choice, saying on Thursday in Brussels that “clearly there are different instinctive opinions.”

His fragile centre-left coalition government put Alitialia 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 has funds for a year if it sells 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 any more state aid.

Uncertainty around the sale heightened this week when a group claiming to include Singapore Airlines sent a letter expressing interest to Alitalia’s board which met on Thursday.

Singapore Airlines said it had no intention of bidding for Alitalia and it had never heard of “Singapore Airlines Holdings,” which was mentioned in the letter, after regulator Consob had asked it to clarify the situation.

And Deutsche Bank slapped down newspaper reports it would advise the mystery group with legal firm Orrick, saying in a statement it saw no reason to agree to a request from the party.