Lufthansa on Friday signed a deal in Vienna to buy 41.65 percent of Austrian Airlines (AUA) from Austria's state holding company OeIAG, creating Europe's biggest airline.
Lufthansa has been negotiating with OelAG since November
Austria's debt-ridden flag carrier was snapped up for a token price of 366,000 euros ($465,000), OeIAG confirmed in a statement.
The German carrier announced Wednesday its plans to take a 100 percent stake in its smaller Austrian rival, first through the privatization and then through buying free-floating shares.
The total price paid by Lufthansa is expected to come to 377 million euros after the airline offered to buy out all other shareholders for 4.44 euros per share, a pitch worth 215 million euros.
One condition for the sale was that the EU approves a 500-million-euro cash injection from the Austrian government for restructuring.
OelAG was told by the Austrian government it had no choice but to sell the stake to Lufthansa.
"The partnership with Lufthansa guarantees not only the continuation of the brand and employment at AUA but also assures long-term access to vital international passengers," head of the holding group Peter Michaelis said in a statement.
Russian airline S7 and Air France-KLM had also expressed interest in acquiring the government stake in AUA, but in November OelAG announced it would negotiate exclusively with Lufthansa.
AUA is forecast to lose up to 125 million euros this year, but said that "special items" could bring the figure up to 475 million euros.