Eni SpA (E) has entered into an asset sale agreement with Belgian company Fluxys for its stakes in gas pipelines Transitgas and TENP. The transaction, which is expected to close by the end of the year, is subject to approval from the European Commission. The deal is consistent with the commitments Eni made to the European Commission in September last year. The divested properties include Eni’s shares in Transitgas and TENP pipelines, which carry Russian gas into Italy via Switzerland and Germany, respectively.
Per the pact, the Italian oil company will unload 46% stake in the Transitgas pipeline, as well as a 100% interest in Eni Gas Transport International, which owns the transportation rights for the Swiss section connecting Belgium and the Netherlands to Italy.
In the German gas pipeline TENP, Eni plans to vend 100% of Eni Gas Transport Deutschland and Eni Gas Transport, as well as a 49% stake in TENP and a 50% holding in Trans Europa Naturgas Pipeline GmbH.
The deal entitles Fluxys to pay 974.7 million Swiss francs (US$1.1 billion) in total to Eni for the interests in the Transitgas pipeline, along with Euro 60 million (US$82.1 million) for the TENP lines. However, the company added that the price will be adjusted on the closing date.
Last year, Eni planned to divest its stakes in three international natural gas pipelines, with a total value of around Euro 1.5 billion, to close a European investigation related to market misuse.
Eni with its consolidated subsidiaries is engaged in oil and gas, electricity generation, petrochemicals, oilfield services and engineering industries. Although we remain upbeat given Eni’s 2011–2014 strategic plans for the upcoming months to enhance production and implement steps to control costs and recover profitability, the uncertainty associated with the group's domestic gas business keep us wary, particularly as regulators continue to take an active interest in the company and the relative profitability of segments across the gas chain.
We expect the company to perform in line with its peers and the industry as a whole, and rate the stock Neutral. Eni, which competes with Statoil ASA (STO), holds a Zacks #4 Rank (short-term Sell rating).
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