Pirelli Examining Real Estate Spin-Off

Pirelli & C. SpA confirmed yesterday (3 May 2010) that its board of directors is meeting today “to examine, among other things, the transaction for separation of Pirelli Real Estate from the Pirelli Group.” According to various sources, the timing of the meeting (a day before the company’s first quarter 2010 results presentation) suggests that the company is likely to announce a spin-off of the real estate business tomorrow 5 May. Deutsche Bank analysts estimate that the move is worth 0.04 euros a share or 8.5 per cent of market capitalisation.

“Furthermore, we expect the group to announce a strong first quarter. We estimate sales will reach 1.2 billion euros,  up 16 per cent,  driven by volume growth (strong replacement markets in Europe and in Brazil) and EBIT before restructuring charges 87 million euros, up 74 per cent,” Deutsche Bank predicted. Their view is that the strong margin improvement is driven by a strong volume effect, a limited raw material headwind (10 million euros – significantly lower than what is expected for full year [200 million euros]) and the payback from restructuring.

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