(Corrects to specify Edison will be equally owned by EDF and Aem venture in the fifth paragraph.)

May 13 (Bloomberg) -- Electricite de France SA, the world's largest power company, and Milan utility Aem SpA agreed to buy Italy's Edison SpA for as much as 7.28 billion euros ($9.2 billion), four years after the French company attempted a hostile takeover.

Electricite de France and an Aem-led venture will pay 4.08 billion euros for the 62 percent Edison stake held by Italenergia Bis SpA, the companies said in a statement today. They then will bid 1.86 euros a share for Edison's traded stock, 9.7 percent more than the May 6 price, for a total of as much as 3.2 billion euros.

The buyout of Edison, Italy's second-biggest power producer, follows an agreement last week between the Italian and French governments to end a four-year dispute over competition in their power markets. Electricite de France was freed to raise its stake in Edison after the French agreed to give state-controlled Enel SpA, Italy's biggest utility, a slice of their market.

``The purchase price is above our expectations,'' said Tony Grossi, who helps manage 3 billion euros at Banca di Roma SpA and holds both Edison and Aem shares. ``We're happy with this deal.''

The French company and Aem will buy Edison through a buyout vehicle formed for the purchase. EDF will appoint Edison's chief executive and chief operating officer, while Aem will appoint the company's chairman. Edison will be equally owned by EDF and the Aem venture.

Resume Trading

The two companies said they will keep Edison's shares traded. Edison's stock advanced 14 cents, or 8.3 percent, to 1.83 euros at 10 a.m. in Milan.

Electricite de France owns 18 percent of Italenergia Bis. The French utility's voting rights were frozen at 2 percent in 2001 because Italian politicians objected to what they perceived as a lack of competition in France.

Italenergia was formed in 2001 as Electricite de France sought Italian allies to try to deflect political opposition. Backed by carmaker Fiat SpA and financial partners, it made a hostile bid worth more than 8 billion euros for Edison and its former holding company.

Electricite de France guaranteed its partners at Italenergia that it would buy their stakes this year. That will take EDF above 30 percent in Edison, requiring the French company to bid for Edison's traded stock under Italian rules.

``The price reflects the fact that they were stuck with the put option, and that was too high,'' said Hendrik Van Brevoort, a fund manager at Putnam Investment in London.

Aem will purchase its stake in Edison through an investment vehicle called Delmi. Aem is negotiating with four partners to share the cost of buying the stake in Edison, Aem Chairman Giuliano Zuccoli said in an interview on May 10.

The company, which supplies electricity and gas to Milan, is talking with Enia SpA, formed this year by the merger of the municipal utilities of Parma, Piacenza and Reggio Emilia, and three unidentified counterparts from the Lombardy region, Enia's Vice-President Marco Elifanti said yesterday in a telephone interview.

To contact the reporter on this story: Nina de Roy in Milan nderoy1@bloomberg.net.

Last Updated: May 13, 2005 05:13 EDT