Eni SpA (E.US) and KKR (KKR.US) are in exclusive talks to sell biofuel subsidiary Enilivio.

Italy's energy giant Eni (E.US) and private equity giant KKR (KKR.US) signed a non-exclusive term sheet for the sale of its biofuel subsidiary Enilive, worth or more than €3bn (US$3.3bn).

Under the agreement, KKR could buy a 20-25% stake in Enilive. Eni said in a statement on Tuesday that the sale of Enilive shares was based on a valuation of the subsidiary of €11.5bn-€12.5bn. Eni said both parties were committed to negotiating a deal.

The potential sale of shares is part of Eni’s plan to restructure the company to fund its transition to gas and renewables. Eni’s chief executive, Claudio Descalzi, is implementing the company’s so-called “satellite” strategy, which aims to create independent units focused on specific businesses, financially independent and attracting investors focused on those businesses.

The strategy began in 2023 with the sale of a minority stake in its retail and renewable energy unit Plenitude to Swiss fund Energy Infrastructure Partners (EIP). The company also plans to split its carbon capture unit and biotech subsidiary Novamont by 2027. The sale of multiple divisions will also allow Eni to follow the practice of other oil giants in returning more cash to shareholders as the company seeks to revive its stock valuation.

Biraj Borkhataria, an analyst at RBC Capital Markets, said the valuation range for Enilive was above market expectations, “This price tag is likely to surprise investors, especially given the recent public market’s reaction to the news of biofuels”.

Eni also said it could sell another 10 per cent stake in Enilive, given the strong interest from investors.