Pirelli RE and Fimit mull merger to create new asset manager

Italian conglomerate Pirelli & Co. is considering merging its real estate arm with fund manager Fimit to create a 'new entity in the asset management and real estate services sector'.

Pirelli & Co., Pirelli Real Estate and Fondi Immobiliari Italiani (Fimit) said on Wednesday that they have agreed to begin a joint feasibility study for a transaction for industrial integration of the assets of Pirelli RE and Fimit.

'This activity of verification and study, which will take place in the coming weeks, will focus on potential operating synergies that could derive from the transaction, its structure and the criteria for valuation of respective assets. The potential transaction would in any case take place coherently with the industrial plan of the Pirelli Group.'

The statement from the three companies was in response to media reports that Pirelli was considering separating real estate from its tyre-making business.

Pirelli Group chairman Marco Tronchetti Provera said that 'there are two different worlds, that of real estate - now restructured - and the industrial one. In the future we will concentrate more on the industrial activities, while the real estate ones could follow a different path.'

Pirelli is understood to be preparing a full separation of the two businesses in order to increase the group's value in the wake of improving tyre financial results. Provera added that the separation process could be realised by the end of 2010. The company is considering a number of options to carry out the separation of the two businesses, including a spin-off of the tyre activities, Provera said, without adding details.

Pirelli's Real Estate unit is 56%-owned by Pirelli & Co. The property arm saw its losses widen to EUR 58 mln in the first nine months of the year from EUR 13 mln a year before. Revenues dropped 33% to EUR 199 mln in the third quarter, from EUR 296 mln in the same period in 2008. The Milan-listed property group completed EUR 658 mln worth of sales in the first nine months of 2009, and confirmed it intends to meet its year-end sales target of EUR 1 bn.

Pirelli Real Estate had EUR 15.1 bn assets under management at end-June 2009, of which EUR 3.9 bn related to assets owned by the group. Fimit was created in 1998 by the Italian state-owned Mediocredito Centrale bank (MCC) and the INPDAP pension fund, to speed up the sell-off of public real estate assets by setting up the first public-contribution real estate funds.

Fimit has EUR 4 bn of assets under management. In October, Italian lender Unicredit announced it was selling 179 properties in a EUR 530 mln sale-and- leaseback transaction to Fimit's Omicron Plus. The fund was launched at the end of 2008 in tandem with the purchase of a first tranche of Unicredit properties for EUR 800 mln.