MILAN – Italy’s Eni (NYSE: E) is in exclusive talks, it said on Tuesday, with investment company KKR (NYSE: KKR) over the sale of a minority stake in Enilive, a deal that could value the biofuel unit at 11.5-12.5 billion euros ($12.5-$13.6 billion) including debt.
KKR’s potential purchase of between 20% and 25% of Enilive would fall in line with Eni’s strategy to develop separate units focused on specific businesses and make them financially independent.
Biofuels, made from vegetable oil, waste cooking oil, and grease, are expected to play a major role in decarbonizing the truck, aviation, and shipping sectors in the coming years.
Market sentiment towards them, however, has become negative as profit margins have weakened and concerns have grown about regulatory support.
Eni’s bigger rivals Shell (NYSE: SHEL) and BP (NYSE: BP) have announced in the last few weeks they were pausing biofuel projects.
Head of Global Energy Transition Research at Royal Bank of Canada (RBC) Biraj Borkhataria said the valuation was well above market expectations the bank believed were in the range of 7-10 billion euros.
Shares in Eni (NYSE: E) rose more than 1% in early trading on the Milan bourse and were at 14.11 euros, up 0.3% at 0806 GMT outperforming a negative blue-chip index.
The Italian energy group said KKR (NYSE: KKR) was not the only potential buyer.
“The strong interest shown in this period by leading institutional financial investors could lead to the subsequent sale of a further stake of up to 10% of Enilive,” it said in a statement.
Analysts calculated Eni could raise more than 4 billion euros should it complete two transactions selling up to 35% of Enilive at the higher price of the range indicated for the KKR transaction.
Eni (NYSE: E) said in March it would sell assets to raise net proceeds of 8 billion euros by 2027 to keep debt under control and fund the energy transition.
Enilive is focused on biorefining, biomethane production, and smart mobility solutions and has a network of more than 5,000 multi-fuel stations in Europe.
It is expected to record core earnings of around 1 billion euros this year.
JPMorgan and Mediobanca were acting as financial advisers for Eni on the Enilive stake sale.
($1 = 0.9195 euros)
(Source: ReutersReuters)
