The Olivetti/Telecom deal
Milan, 30 July 2001 - The Chairman of Pirelli SpA, Marco Tronchetti Provera, announced today the main guidelines of the new industrial strategy on which the Olivetti-Telecom operation has been based.
The Chairman stated that the acquisition of a relative majority shareholding in Olivetti-Telecom is an integral part of a new mid-long term strategy formulated by the Company's Top Management in recent months and entails radical change in the Pirelli Group. This strategy is focused on telecommunications, i.e. cables, optical fibres and components technology, as well as on Tlc services.
Acquisition of the participation in Olivetti-Telecom should, therefore, be evaluated against this background, as much as the formation of a new corporate vehicle which will hold the Olivetti shares bought from Bell S.A., about 23% of the capital, together with the Olivetti shares already held by Pirelli SpA and Edizione Holding SpA, respectively 1.80% and 1.84%. The new entity, controlled by Pirelli SpA, shall hold an overall participation in Olivetti of about 27%.
In addition to the new telecommunication activity, the strategy also includes a restricted number of highly profitable businesses, operating at the top end of their respective markets. Essentially, these businesses are the car and motorcycle operations of the Tyre Sector, the future of which is closely linked to the new MIRS technology, and the real estate business conducted through Pirelli & C. The remaining traditional businesses of the Group, though generating a high cash flow and being well positioned in their markets, will be gradually withdrawn and disposed of in order to maximise the resources available to the telecommunication operations.
Through this strategy, the Pirelli Group will pursue a radically changed and enhanced business structure, its focus being the most advanced technologies with the best market prospects. This aim will be facilitated by the synergies that Pirelli and Telecom will be able to develop in the areas of technology, management, and knowledge of and introduction to the international markets of interest to the Group.
As a guarantee that the new strategic objectives shall be reached in full and in the shortest possible time, the Pirelli Group is committing its top management, as is Edizioni Holding, to the management of the Olivetti-Telecom Italia telecom operations, with Marco Tronchetti Provera as Chairman, Gilberto Benetton as Deputy Chairman, and Carlo Buora and Enrico Bondi as Managing Directors.
This new structure will become operational only after the necessary authorisation from the competent authorities.
Finally and with reference to the announcement of 28th of July, it is confirmed that the purchase price of the Olivetti shares belonging to Bell S.A. was 4.175 per share, settlement date August 31st. 2001. As for the financing conditions, the purchasing company shall have an equity of Lit. 10,000 billion and a debt for around Lit. 4,000 billion. Edizioni Holding S.p.A. has pledged a 20% share, while Intesa Bci and Unicredito have indicated an interest in participating with a shareholding of 10% each.
The capital is to be covered with Lit. 8,000 billion through Pirelli Group liquidity and lines of credit (which will possibly decrease down to Lit. 6,000 billion by capital subscriptions from new shareholders) and Lit. 2,000 billion from Edizioni Holding S.p.A.
The Lit. 4,000 billion loan is to be provided by a pool of major Italian and international financial institutions.
The following statement is intended to be added after the fourth paragraph (ending with "to maximise a resources flow towards telecom operations").
The Truck Tyre and the Energy Cables Units will be divested, presumably in the next eighteen months, for an assumed total price of at least 2 billion.