Pirelli To Buy Biccgeneral Energy Cable Activities In Europe, Africa And Asia
Milan, February 9th, 2000 - Pirelli announces that an agreement has been reached with BICCGeneral for the purchase of energy cable activities previously owned by the British group BICC plc and taken over last year by the American group General Cable.
In 1999 the activities to be purchased reached a turnover of about Euro 700 million, with 3,500 employees and 11 factories located in the UK and Italy (which, together, accounted for over 80% of the 1999 turnover) Africa and Asia, including a joint-venture located in Shanghai, China, a priority area of development for Pirelli Cables and Systems.
Pirelli will buy activities with a total net worth of around $ 370 million for a total consideration of $ 216 million; the discount is related to the net fixed assets price of $ 85 million compared to a net book value of $ 241 million. This acquisition will raise the Cables and Systems turnover in the energy business to about Euro 3,400 million. According to Pirelli's expectations, the activities to be acquired, which recorded a loss on an hystorical cost basis for the full year 1999, will recover positive results within 12 months, to then reach the performance targets already scheduled for Pirelli Cables and Systems.
The power utilities market liberalisation and the integration of the markets fostered also by the monetary union are re-designing the competitive environment, opening up new opportunities to suppliers of energy transmission and distribution systems. The deal announced today allows a significant strengthening of the activities to be acquired, by Pirelli technological support and integration synergies.
Pirelli's value creation objective will be pursued also through manufacturing rationalizations - e. g. in the UK utilities business, where Pirelli intends to focus on existing BICC manufacturing units -and product portfolio integration.
Growing environmental requirements and increasing demand in the energy field will generate more opportunities for underground cables and distribution systems. In this frame, Pirelli's strategy is to create a strong European pole for energy transmission, able to compete effectively in the global market.
Larger R& D investments and focused technological synergies, together with optimized local presences in the different countries, will improve Pirelli Cables and Systems ability to offer innovative solutions to the power utilities that are moving fast from national to worldwide global players, enhancing more and more the concept of energy networking.
"We are pleased to have reached agreement with Pirelli to sell to them certain European, African and Asian business units," said Stephen Rabinowitz, Chairman and CEO of BICCGeneral. "The best long-term growth opportunities for BICCGeneral are present in the acquired Iberian operations, including Spain and Portugal; the Oceania operations, including New Zealand and Australia; both North and South America. At the same time, Pirelli is acquiring attractive assets at a reasonable cost that will provide them with technically-advanced manufacturing operations and access to new markets."
"In a context where technology is more and more the main competitive driver, our strategy", said Giuseppe Morchio, Chairman and CEO of Pirelli Cables and Systems, "is to grow and strengthen, both through strategic alliances with excellent global partners - such as Cisco in telecommunications - and through acquisitions of high-tech activities, such as BICCGeneral in energy transmission. This deal will further improve Pirelli positioning in the world energy market leveraging on his technological leadership, particularly in the submarine systems and terrestrial high-voltage business".
The completion of the acquisition is expected by June next, subject to the approval by the competent EU and Antitrust Authorities.