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ROME (Reuters) -Europe’s biggest gas distributor Italgas is planning to raise around 1 billion euros ($1.1 billion) in capital to finance the acquisition of its main domestic rival 2i Rete Gas, newspaper Il Sole 24 Ore reported on Friday.
While details of the deal are still in the works, “it is certain that the operation will bring with it a capital hike…. which, according to calculations by those working on the deal, is of around 1 billion euros,” the financial newspaper said.
In May Italgas CEO Paolo Gallo said he could not provide details of the bid, which Il Sole 24 Ore said would be worth more than 5 billion euros.
A final offer is expected in the coming weeks, the report said, adding that the parties were assessing the premium to apply to 2i Rete Gas’ 4.9 bln euros regulatory asset base (RAB), the value of investments made on the network, a key parameter for a company working in a regulated market.
CDP Reti, a unit of state lender CDP which owns 26% of Italgas, has already said it was in favour of the possible acquisition and was considering ways of backing the deal.
The paper said CDP Reti had already granted its full, pro-quota commitment to the capital increase.
Asked about the report, an Italgas spokesperson said the company never commented on rumours.
Italian infrastructure fund F2i owns 64% of 2i Rete Gas. Dutch pension fund APG and buyout group Ardian together hold the remaining 36.1%.
A merger would be a major step in the consolidation of Italy’s gas distribution market with 2i Rete gas – Italy’s second-largest distributor – adding a 20% market share to Italgas’ 35%, according to analysts.
In announcing the talks, Italgas said it would cover its financing needs through a bridge loan guaranteed by JP Morgan which may be refinanced through equity, debt or “equity-like” tools, with the aim of maintaining its current rating profile.
Shares in Italgas fell 0.3% by 0718 GMT in Milan against a 0.7% drop in the FTSMIB index.
($1 = 0.8998 euros)
(Reporting by Giulia Segreti; Additional reporting by Francesca Landini; Editing by Kim Coghill and Valentina Za)