Pirelli Sells Cable Business to Goldman Sachs for 1.3 billion euros

Pirelli & C SpA has sold its Energy and Telecom Cables and Systems business to Goldman Sachs for 1.3 billion euros. So what will the investment company get for its money? In 2004 the cable business turned over more than 3.2 billion euros, with an operating income (EBIT) of more than 110 million. The transaction includes intellectual property rights and Pirelli brand licensing for two years. While the business itself employs 12,000 people in its 52 plants around the world.

Upon completion of the transaction, Pirelli’s net financial position will improve by around 1.2 billion euros of which 490 million relates to equity value. Around 690 million euros relates to net debt that will be deconsolidated at closing. In addition, Pirelli will receive a warrant which will allow it to share up to 5 per cent of the economic value uplift generated by Goldman Sachs Capital Partners. Pirelli will also retain the statutory UK pension liabilities of around 95 million euros.

Goldman Sachs is reportedly “fully supportive” of the businesses’ existing management team and say they will work together in order to grow the business.

As a result of the transaction, Pirelli says that the strategic optimisation programme it announced in July 2001 is now complete. The company now reportedly wants to focus on higher value-added businesses and in particular on: telecommunications, tyres, real estate, and activities in the field of broadband and second generation photonics.

The transaction remains subject to final approval from regulatory and government bodies including the UK pension fund, the Antitrust Authorities and the French Economy Minister, in relation to some France-based production.