* Talks between CVC and Recordati started in late 2017-sources
* Bid plan dropped before Italy's elections on March 4-sources
* High price, political uncertainty among main hurdles fordeal(Adds share reaction)
By Pamela Barbaglia and Stephen Jewkes
LONDON/MILAN, May 17 (Reuters) - Buyout fund CVC CapitalPartners held talks with Italian drugmaker Recordatiover a possible 8 billion euro ($9.4 billion) takeover, but hasput the deal on hold due to concerns about the hefty price tagand political uncertainty, three sources familiar with thematter said.
Recordati, a family-owned maker of cardiovascular and rarediseases drugs, is Italy's biggest listed pharmaceutical companywith a market value of 6.4 billion euros ($7.6 billion).
The Recordati family, which controls about 51 percent of thecompany via their Fimei holding, has been sounding out potentialbidders in the last two years following the death of thecompany's former boss Giovanni in 2016, the sources said.
Recordati shares rose as much as 6.5 percent on the news totheir highest level in more than three months. By 1043 GMT, thestock was up 5.8 percent, leading gainers on Italy's FTSE MIBblue chip index.
The family does not want to sell on the cheap. An 8 billioneuro bid would imply a premium of 25 percent for the wholebusiness, the sources said.
London-based CVC began talks with Recordati last year butone of the sources said it decided to put the deal on holdshortly before Italy's national elections on March 4, whichresulted in a strong showing for anti-establishment parties anda hung parliament.
"There was momentum in negotiations in late 2017 but theywaited too long. Right now there is no appetite to make big betsin Italy," the source said.
CVC would need to borrow cash to finance a takeover ofRecordati and raise additional funds by distributing shares inthe group to its own investors - a task made more challenging byItaly's protracted political stalemate.
"Recordati would be a great investment for CVC but it's hardfor them to justify such a high price with the ongoing politicaluncertainty," the source said.
Financial markets and investors had been relativelyresilient during 10 weeks of inconclusive talks between Italianpolitical parties seeking to form a government.
That changed this week as the anti-establishment 5-StarMovement and the far-right League neared a deal to form acoalition government and challenge European fiscal rules.
On Wednesday, Italy's borrowing costs jumped and its stocksslid after a draft programme for the potential governmentrevealed plans to demand 250 billion euros of debt forgiveness.
A second source with knowledge of the negotiations said theclouded political outlook had played a role in CVC's decision tosit on the fence for now, adding no other bidders were currentlyin talks with the Recordati family.
CVC could re-examine the deal once the political situationstabilises, the first source said.
CVC declined to comment, while Recordati was not immediatelyavailable for comment.
Recordati, led by Chief Executive Andrea Recordati andChairman Alberto Recordati, was founded in 1926 and has revenuesof 1.2 billion euros and net income of 288 million euros. Almost80 percent of its overall revenues are made outside Italy.
The Milan-based company employs more than 4,000 people andoperates in Western Europe as well as Russia and various Centraland Eastern European countries, the United States, Canada, NorthAfrica and Latin America.
HIGH VALUATION
CVC, which raised a record 16 billion euros for its latestfund for private equity investments in Europe and North America,has spent several months trying to "make the numbers work", oneof the sources said.
It had initially looked at the possibility of mergingRecordati with generic drug firm Alvogen, another healthcarebusiness in its portfolio, in a bid to create scale and extractsynergies, this source said.
Under the planned deal, CVC would have bought the Recordatifamily's stake in the company and then launched a mandatorypublic offer for the remaining shares, as required by Italiantakeover rules. If successful, CVC would have de-listed thecompany from the Milan stock market.
Recordati shares have strongly outperformed the Europeanhealthcare sector in the last four years, almosttrebling their value, boosted by delivery on strong organicgrowth and M&A.
Healthcare companies are typically trading at highermultiples as the sector is perceived as resilient andrecession-proof. The industry has attracted a large slice ofglobal M&A activity this year, with Japan's Takeda recentlyclinching a 45.3 billion pound deal for London-listed Shire.
Private equity funds have also tried to gain more exposureto the sector with London-based buyout fund Advent recentlyentering exclusive talks to buy Sanofi's ZentivaEuropean generics arm for 1.9 billion euros.
Last year a consortium of Bain Capital and Advent won a 5.4billion euro takeover quest for German generic drugmaker Stadathat spanned for several months.
($1 = 0.8477 euros)
(Reporting By Pamela Barbaglia, additional reporting by DaniloMasoni; Editing by Susan Fenton)
