Sources in Italy are reporting that the country's government is contemplating merging assets from utility group Enel with those of oil firm Eni.

The Il Sole 24 Ore newspaper reports that the move is being considered as a means to defend the two firms from a possible foreign takeover. It is thought that Germany’s E.ON could bid for Enel if its current efforts to buy Spain’s Endesa prove unsuccessful.

Under the newspaper’s description of the merger, Eni’s power from Enipower and its gas distribution business would both be transferred to Enel, in return for the gas and oil player taking around 25% of the latter.

Reuters cited an Italian treasury source as saying the report is completely groundless.