Alitalia agrees sale to Air France-KLM

By Deepa Babington and Alberto Sisto

ROME (Reuters) - Nearly bankrupt Italian carrier Alitalia AZPIa.MI has agreed to be bought by Air France-KLM (AIRF.PA), the world's biggest airline by revenue, for a smaller-than-expected sum of $184 million (90.8 billion pounds) and a pledge to buy back bonds.

A hot issue ahead of Italy's general election on April 13-14, the deal still needs the blessing of Italy's next government and Alitalia's strike-prone unions, which gave the agreement a cold reception, before it can be concluded.

Opposition leader Silvio Berlusconi, currently ahead in opinion polls, has in the past criticised the sale to Alitalia's long-time partner and European neighbour, saying he favours an Italian solution.

The takeover would end the 60-year independence of a global Italian brand, but would also avoid the flagship airline going broke as its cash reserves quickly dry up while the European Union has banned any more state aid.

The airlines said Air France-KLM in its binding bid had offered one share for every 160 shares of Alitalia, valuing its stock at 0.10 euros a share, or 138 million euros in all, an 81 percent discount to the record low price at Friday's close.

That price is well short of the 0.35 euros per share that Air France-KLM was said to have initially bid and is closer to the 1 cent-per-share offer from domestic player Air One, which lacked the deep pockets of its rival and was snubbed by Rome.

Air France-KLM also offered to pay 608 million euros to buy back Alitalia bonds and pledged to underwrite a 1 billion euro cash call to shareholders as part of a commercial overhaul.

The share swap will take place as early as June, Alitalia said in a statement after Italian stock market regulators asked for clarification.