Pirelli sells cable-making division for $1.58 billion
Pirelli & Cie SpA has sold its Energy and Telecom Cables and Systems business to Goldman Sachs Capital Partners for 1.3 billion euros.
Based on the exchange rate between the United States dollar and the euro at the time of the purchase, Goldman Sachs paid $1.58 billion for the business.
Under the terms of the agreement, Pirelli will sell to Goldman Sachs Capital Partners "activities that had in 2004 sales of 3.208 billion euros and operating income (EBIT) of more than 110 million euros. That includes intellectual property rights and Pirelli brand licensing for two years.
Pirelli's Energy and Telecom Cables and Systems business has 12,000 employees and 52 plants worldwide.
Upon completion of the transaction, Pirelli's net financial position will improve by close to 1.2 billion euros. That roughly breaks down as follows:
* 490 million euros relates to equity value; 135
million euros of this amount will be in the form of a vendor loan.
* 690 million represents net debt, which will be deconsolidated at closing.
In addition, Pirelli will receive a warrant that will allow it to share in up to 5% of the economic value uplift generated by Goldman Sachs Capital Partners. Pirelli also will retain the statutory United Kingdom (UK) pension liabilities of around 95 million euros.
The transaction is subject to final approval from regulatory and government bodies including those of the UK pension fund, the Antitrust Authorities and the French economy minister (some production is based in France).
Pirelli says Goldman Sachs Capital Partners is fully supportive of the existing management team of the business, and intends to work with the existing management team to continue to grow and develop
Net proceeds of the operation will be invested in strategic
activities of the Pirelli Group. The company says it will "focus on the development of higher value-added businesses," including its telecommunications, tire and real estate business activities.