Pirelli Will Sell Broadband-Communications Unit This Year, Chairman Says
Pirelli & C. SpA, Europe’s third- largest tiremaker, will sell its broadband communications unit as part of a reorganization that includes a spinoff of real- estate assets, Chairman Marco Tronchetti Provera said.
Pirelli is examining at least five offers for the maker of set-top boxes and network adaptors, Tronchetti Provera said in an interview. The sale, targeted for this year, will complement a spinoff of Pirelli & C. Real Estate SpA that would result in two companies directly held by Camfin SpA, Pirelli’s largest shareholder, he said.
Milan-based Pirelli is spending 300 million euros ($367 million) on its tire business this year and plans to double capacity in China, Egypt and Romania to take on rivals Continental AG and Michelin & Cie. Tronchetti Provera said he’s looking to acquire tire factories in Asia, though ruled out a merger with a competitor.
“We are building a new Pirelli,” Tronchetti Provera, 62, said in the interview at his Milan headquarters yesterday. “My dream is to make Pirelli stronger and stronger, a technological leader that is taking on a world that is growing faster and faster.”
Pirelli Broadband Solutions reported 2009 sales of 132 million euros, according to Pirelli’s annual report. Tronchetti Provera declined to identify potential buyers. Pirelli sold its remaining shares in Telecom Italia SpA, Italy’s largest phone company, in the third quarter of 2009.
“The sale of the broadband unit fits into the strategy to concentrate on the tire business as the only internal industrial operation,” said Oriana Cardani, an analyst at Centrobanca SpA in Milan with a “buy” rating on Pirelli.
Pirelli is the best performer on Italy’s benchmark index in the past 12 months, rising 78 percent as the FTSE MIB Index fell 2.3 percent. The shares declined 1.7 percent to 45 cents in Milan today, valuing the company at 2.4 billion euros.
The tiremaker will likely raise prices once more in Europe before the end of this year, following an increase in April, to compensate for higher costs of materials including rubber, Tronchetti Provera said.
Pirelli was named last week the official tire supplier for the FIA Formula One World Championship for three years. Tronchetti Provera said the deal to supply all 12 F1 teams with tires will give a boost to its premium-tire business, such as sales to BMWs and Ferraris.
Pirelli & C. Real Estate has 16.4 billion euros in assets under management, with most of the properties in Italy and Germany, according to the company. Assets include buildings that house the Rinascente department store in Milan’s Piazza Duomo as well as the Via del Tritone building in Rome that houses jeweler Bulgari SpA.
The spinoff will create two companies, one focused on tires and the other on real estate, Tronchetti Provera said. Camfin, which is controlled by Tronchetti Provera, will directly hold stakes in each as a result of the transaction.
“We are committed to real estate and we want to unlock the hidden value,” he said. “The company has gone through a very tough restructuring, the results of which we think will already be visible next year.”
Tronchetti Provera confirmed a forecast for Pirelli to lift sales more than 10 percent this year. Pirelli on May 4 raised its 2010 revenue target to as much as 5 billion euros, from a previous projection for as much as 4.8 billion euros. The tiremaker said at the time it expects earnings before interest and taxes to be at least 6.5 percent of sales this year.
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