EDF reaches deal to take over Italy's Edison

French electricity giant EDF said Tuesday it had reached a new agreement with Italian shareholders in Edison to take majority control of Italy's second biggest power company. The new agreement signals an end to the 10-year pursuit of Edison by EDF, with the drawn out talks leading to sharp ratings downgrade of the Italian company to junk status. The agreement, subject to regulatory and corporate approvals, would increase EDF's stake in Edison from around 50 percent currently, via direct and indirect holdings, to around 80.7 percent, EDF said in a statement. In exchange Italian shareholders would gain control of the electricity production unit Edipower, which will enter into an agreement with Edison to supply it with gas for half of its needs for six years, the statement added. "This agreement will allow the emergence of two energy champions in Italy which thanks to their stabilised organisation and a relaunch of their activity will contribute to the recovery of the growth of the Italian economy..." said EDF. It said the Italian shareholders would pay 800 million euros ($1.0 billion) to acquire the stake in Edipower, which is 100 million euros more than it will pay to acquire the stake in Edison. The new agreement follows months of difficult negotiations, with Italian shareholders threatening last week to abandon talks if they did not get control of Edipower. Last week Fitch ratings agency cut Edison's rating by three notches to junk status, from BB- from BBB- due to "the negative impact of the prolonged negotiation process" as well as weak liquidity. However Fitch said there was the possibility for positive movement to the rating if EDF won clear control of the company. EDF said it expected approval of the deal from the various holding companies by the end of January with final contracts to be signed by February 15. EDF has been involved with Edison for a decade, buying a stake in its holding company in 2001 and teaming up with carmaker Fiat to take control, only to have the Italian government limit its voting power. In 2005 it teamed up with other Italian shareholders to jointly manage Edison, but disagreements over strategy led EDF to seek to take majority control. Founded in 1884 and based in Milan, Edison is Italy's oldest electricity company and is currently in second place in electricity generation behind Enel, producing 41.8 terrawatt hours of electricity or 14.6 percent of the country's total in 2010. Edison is also Italy's number two gas company, with 19.1 percent of the market last year, behind ENI.