Eni SpA E is in exclusive negotiations with investment firm KKR over the sale of a minority stake in its biofuel unit, Enilive, per a Reuters report.
The deal, which could value Enilive at €11.5-12.5 billion ($12.5-$13.6 billion), including debt, underscores Eni's strategic shift toward making its business units financially independent.
The transaction would see KKR acquiring a 20-25% stake in Enilive. The move aligns with Eni's broader strategy of developing focused business units, thereby enhancing its financial autonomy.
A preliminary agreement is anticipated by September, coinciding with the end of the exclusivity period, with the final transaction likely to conclude by the year's end.
Enilive plays a pivotal role in Eni’s portfolio, operating several biorefineries in Italy and abroad that produce biofuels from vegetable oil, waste cooking oil and grease. These biofuels are integral to the decarbonization efforts in the trucking, aviation and shipping sectors.
However, market sentiment toward biofuels has recently turned negative due to weakening profit margins and increasing concerns about regulatory support. Despite these challenges, Enilive’s valuation in the proposed KKR deal is significantly higher than market expectations, which Royal Bank of Canada (RBC) estimated to be €7-10 billion.
Enilive’s comprehensive business model, which includes the production of biomethane, smart mobility services and a network of more than 5,000 multi-fuel stations across Europe, has attracted substantial interest from potential investors. The unit's core earnings for 2024 are projected to be €1 billion, with more than half of this coming from its fuel stations.
Eni has indicated that KKR is not the sole potential buyer. The robust interest from leading institutional financial investors may pave the way for the subsequent sale of an additional stake of up to 10% in Enilive. The deal reflects Eni's commitment to transforming its business structure and capitalizing on the growing interest in sustainable energy solutions.
Zacks Rank & Stocks to Consider
Eni currently carries a Zacks Rank #3 (Hold).
Investors interested in the energy sector may look at some better-ranked companies mentioned below. The three companies presently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
SM Energy Company SM is set to expand its oil-centered operations in the coming years, with an increasing focus on crude oil, especially in the Permian Basin and Eagle Ford regions. The company’s attractive oil and gas investments should create long-term shareholder value.
The Zacks Consensus Estimate for SM’s 2024 and 2025 earnings per unit is pegged at $7.30 and $8.89, respectively. The company has a Zacks Style Score of A for Value, and B for Growth and Momentum. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.
Sunoco LP SUN is a leading wholesale motor fuel distributor in the United States, boasting a vast distribution network spanning 40 states. With long-term contracts servicing more than 10,000 convenience stores, it distributes more than 10 fuel brands, ensuring a stable revenue stream. SUN currently has a Value and Growth Score of A.
The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $7.29 and $7.26, respectively. The partnership has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.
GeoPark Ltd. GPRK, based in Hamilton, Bermuda, is an explorer, operator and consolidator in the oil and gas sector. The company primarily operates in Chile, Colombia, Brazil and Argentina. It has a Zacks Style Score of A for Value and Growth.
The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $3.23 and $3.98, respectively. The company has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.
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