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Pirelli merges financial companies

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Pirelli & C. (Luxembourg) SpA and Pirelli SpA officially merged Aug. 4.

When the merger of the two financial companies went into effect, Pirelli SpA's shares from the Italian Stock Exchange were cancelled. On the last day Pirelli SpA shares were listed, they sold for $1.03 a share.

The new ticker symbol will be PECI.MI.

According to the company, the value of new share capital of the new Pirelli &

C. SpA will be close to 1.8 billion euros (3.46 billon shares at .52 euros a share), or $2.02 billion. The number of shares is broken down as follows:

* 3,325,619,031 ordinary shares.

* 134,764,429 non-convertible saving shares.

The reorganization helped Milan, Italy-based Pirelli SpA get more financing from its lenders.

"We had to shorten the control chain," said one Pirelli executive when the merger plans were announced earlier this year.

Pirelli's stock price is down close to 70% from five years ago. By making two of the company's five business units "a bit more transparent and successful," the hope is the stock price will rise, and financial institutions will extend the tiremaker credit when the company needs it.

Prior to the merger, Pirelli's tire unit made up about 50% of the company's revenues. Pirelli owned 100% of its tire business unit through Pirelli & C., a holding company, and Pirelli SpA. Pirelli & C., in turn, owned 49% of Pirelli SpA.

The merger is reminiscent of Pirelli SpA's merger with Pirelli Tyre Holding 10 years ago.

Corporate restructuring also is expected to take place with Pirelli's controlling interest in SPV Olimpia, a holding company for Olivetti SpA. Olimpia owns 51% of Olivetti, which, in turn, owns controlling interest in Telecom Italia.

Olivetti will merge its assets into Telecom Italia; as a result, Olivetti’s controlling stake in Telecom Italia will be cancelled, and Olimpia’s -- and by association Pirelli's -- stake in Olivetti will be significantly diluted.

Last April, a Pirelli spokesman admitted that there is a risk that Pirelli might lose control of Telecom Italia because of the restructuring. "But once something is vulnerable on the stock exchange, the price of the stock starts going up."

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