Snam, one of Europe's biggest gas transport groups, has agreed to buy a majority stake in the TAG gas pipeline carrying Russian gas into Italy as part of its drive to integrate Europe's patchwork of gas grids.
Snam, controlled by state lender Cassa Depositi e Prestiti (CDP), has a strategic alliance with Belgium's Fluxys as it seeks to expand its footprint across Europe.
The company's strategy is in step with long-running government plans to cut high energy prices by transforming Italy into a southern European gas hub with supplies from Russia, North Africa and, further down the road, Azerbaijan.
In its four-year business plan to 2017, Snam announced it had signed a memorandum of understanding with CDP to buy its 89 percent stake in TAG.
The 400-km (250-mile) pipeline, 11 percent owned by Austria's OMV, has long been seen as strategic by Italy in bringing in Russian gas through Ukraine, Slovakia and Austria.
Italy, which imports around 90 percent of its gas needs, has become increasingly dependent on Russian gas after oil major Eni agreed last year to take lesser volumes from Algeria.
Eni Chief Executive Paolo Scaroni has said any gas crisis stemming from the growing dispute between Russia and Ukraine over Crimea would not for the time being threaten Italy's energy needs but added if another gas source, other than Russia, went down the problems would be serious.
"The (TAG) acquisition, likely to be done through a capital increase reserved for CDP, will not only help boost capital but will also boost earnings by 3-4 percent and support dividend policy," Societe Generale utility analyst Alberto Ponti said.
Snam CEO Carlo Malacarne previously said that to buy TAG the group may issue new shares for CDP, which bought the pipeline in 2011 for 710 million euros ($988 million), including debt.
Snam's four-year business plan did not disclose any figures for the size of the deal or when it would be completed.
CDP owns 30 percent of Snam, which gives it a controlling grip on shareholder meetings. It is currently looking for a buyer, or buyers, for a stake of up to 49 percent in the vehicle which controls Snam and which could soon also control a similar stake in power grid operator Terna.
Snam - which operates regulated gas transport, distribution and storage assets - said