KEY POINTS
- Italgas plans €1 billion ($1.1 billion) capital raise for 2i Rete Gas acquisition.
- The bid, valued over €5 billion, aims to consolidate Italy’s gas market.
- CDP Reti backs the capital increase, and Italgas secures a bridge loan from JP Morgan.
Italgas, Europe’s largest gas distributor, is preparing a €1 billion capital increase to fund its bid for domestic rival 2i Rete Gas, according to a report from Il Sole 24 Ore.
The potential acquisition is part of a broader strategy to consolidate Italy’s gas distribution market, where Italgas already holds a 35 percent share.
Capital hike to fund major acquisition
The planned capital raise is aimed at supporting Italgas’ purchase of 2i Rete Gas, Italy’s second-largest gas distributor. The total value of the bid is expected to exceed €5 billion.
In addition, the acquisition would add 2i Rete Gas’ 20% market share to Italgas, giving the company a commanding position in the country’s gas sector. According to the report, the final offer is expected to be submitted in the coming weeks.
Citing sources close to the deal, the financial newspaper said Italgas’ move would likely include a capital increase with backing from CDP Reti, which holds a 26% stake in Italgas. However, the state lender’s infrastructure unit has already committed to supporting the capital raise. In addition, Italgas has secured a bridge loan from JP Morgan, which may be refinanced through equity or debt, ensuring the company’s financial stability throughout the process.
Regulatory considerations and market impact
The bid is still under evaluation, with discussions centering around the premium to apply to 2i Rete Gas’ regulatory asset base (RAB), valued at €4.9 billion. Moreover, this base value represents the network investments and serves as a key metric for companies in regulated markets like gas distribution.
Furthermore, the merger would be a major step in consolidating the Italian gas market, aligning with the strategic goals of both companies. Analysts say the move could reshape competition in the sector, as Italgas solidifies its dominance.
CDP Reti has signaled strong support for the deal, granting a full pro-quota commitment to the capital increase. However, the market reacted cautiously, with shares in Italgas slipping by 0.3% on the Milan stock exchange amid broader market declines.
Italgas has declined to comment on the specifics of the deal, with a company spokesperson stating they do not respond to market rumors.
Source: Reuters
