Air France-KLM Group, the world's largest airline by sales, offered to buy Alitalia in a bid valued at 747 million euros ($1.17 billion) as part of the Italian government's plan to save the state-owned carrier from bankruptcy.
Air France-KLM offered 1 of its shares for every 160 of Alitalia's, valuing the Italian airline at 139 million euros, or about 10 cents a share, less than a fifth of its closing price Friday, Air France-KLM said in an e-mailed statement.
Air France-KLM will also offer to buy convertible bonds for 608 million euros.
Alitalia's board accepted the bid after meeting for more than 10 hours in Rome on Saturday.
"Air France-KLM's offer, conditional on a number of elements, is based on an industrial plan providing for the restructuring and relaunch of Alitalia," the Paris-based carrier said.
In buying Alitalia, Air France-KLM would win access to one of continental Europe's biggest passenger markets, with a population of about 58 million people, comparable with France, with 61 million people.
It would also get airport bases, or hubs, in Rome and Milan, from which Air France-KLM could tap passenger flows for flights internationally.
Alitalia's unions and the government must agree to the offer for the sale to go ahead, Air France-KLM said. Once completed, Air France-KLM would raise 1 billion euros in new funds for Alitalia through a share sale to fund "the commercial relaunch of Alitalia," Air France-KLM said.