French utilities giant EDF and its new partner, a Milan-based electricity utility company, are to buy 100% of Italy's second largest power utility in a deal worth E7.3 billion.

EDF and its new ally, AEM, are to acquire full ownership of Edison SpA by forming a joint venture that will buy Italenergia Bis, of which EDF currently owns 18%. EDF has the right to fully take over Edison SpA through a series of put and call options, and through purchasing the remaining minority-owned shares.

Italenergia Bis currently owns 62% of Edison, while a number of minority shareholders own the remaining 38%. EDF and AEM will buy out Italenergia for E4.1 billion and then offer a total of E3.2 billion for the minority shares.

The alliance with AEM comes as a relief to EDF, as the French power titan had been facing potential costs of E13 billion as a result of its financial commitments to Italenergia Bis. Subject to receiving EU regulatory approval, EDF will now take control of the second largest utility in Italy, which has the highest energy tariffs in Western Europe.