Pirelli outlines plans for real estate spin-off

Pirelli & Co outlined plans this week to spin off its real estate arm amid improving results for both its tyre and real estate businesses. In a statement, the Milan-based group said that it will assign its 58% stake in Pirelli & C Real Estate to its own shareholders following shareholder approval by end-July. The deal, which should close this year and is supported by the company's banks, will take place through a voluntary reduction of Pirelli & Co.'s capital for an amount equal to the value of the Pirelli RE stake being assigned.

'In light of progressive improvements in results of Pirelli RE, lending banks have confirmed their support for the transactions,' the company said. Major lenders include WestLB and Unicredit.

The board is also proposing a reserved capital increase of up to 10% of Pirelli RE's share capital to strengthen its financial base. Mediobanca and Unicredit said that they are 'available for future underwriting for a total of EUR 20 mln', but have also committed to sign a shareholder pact to remain below the 30% threshold which would require them to launch a takeover bid.

Pirelli said that the spin-off would make its real estate unit more digestible for future merger and consolidation. 'Pirelli RE will have a wider shareholder base and will possibly attract more takeover bids, with potential benefits for its market value,' the company said. The transaction will also 'create favorable conditions for a more flexible platform for potential future partnerships, it added.

As part of the transaction, Pirelli RE plans to change its name, to be reviewed at a future board meeting. Pirelli said it will also carry out a 1-for-11 reverse share split as part of the overall spin-off operation. After the operation, Camfin is likely to become Pirelli RE's largest shareholder with 15%, followed by Mediobanca with 5%.

In the first quarter, Pirelli RE posted a net profit of EUR 0.4 mln, compared with a loss of EUR 15.8 mln a year earlier. The company announced plans to separate its tyre and real estate businesses at the end of last year after a failed attempt to merge its real estate asset management arm with Fimit Immobiliare.