ROME (Reuters) - Europe's biggest gas distributor Italgas is planning a capital hike of about 1 billion euros ($1.11 billion) to finance the acquisition of its main domestic rival 2i Rete Gas, newspaper Il Sole 24 Ore reported on Friday.
"The puzzle is still being defined, but it is certain that the operation will bring with it a capital hike.... which, according to calculations by those working on the deal, is around 1 billion euros," the financial newspaper said.
Cdp Reti, part of state lender CDP which owns 26% of Italgas, has already said it was in favour of the possible acquisition and was considering forms of support for the deal. The report said it has already granted its full, pro-quota commitment to the capital increase.
A final offer is expected in the coming weeks, the report said, adding that the parties involved are assessing the premium to be applied 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.
Italian infrastructure fund F2i controls 2i Rete Gas with about 64%. Dutch pension fund APG and buyout group Ardian together hold the remaining 36.1% under the vehicle Finavias.
A merger between the two would be a major step in the consolidation of the gas distribution market in Italy with 2i Rete gas - Italy's second-largest distributor for the fuel - adding a 20% market share to Italgas' 35%, according to analyst calculations.
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.
($1 = 0.8998 euros)
(Reporting by Giulia Segreti; Editing by Kim Coghill)