Pirelli confirms plans to hive off Pirelli Real Estate

Pirelli confirms plans to hive off Pirelli Real Estate.

The Italian tyre manufacturer confirmed today plans to spin off its real estate arm, suggesting this would make it more attractive as a takeover target.

Pirelli, the profitable Italian tyre manufacturer, said today it was going ahead with a move to spin off Pirelli Real Estate.

The Milan-based company wants to hive off the division, which contributes just 6 percent of group sales and made a €5 million loss in the final quarter of 2009, in order to focus on its core business, it said.

Pirelli will separate the real estate company by assignment of nearly all its shares – equating to about 58 percent of the company – and consequent voluntary capital reduction. Lenders to Pirelli Real Estate have approved the plan and the name of the company will be “modified”.

But the tyre manufacturer also said the move would make it more “appealing to possible takeover bids”. 

Pirelli first flagged its intention to spin off Pirelli Real Estate when it unveiled its “industrial plan” in 2009 to  turn itself back into a pure worldwide tyre maker – already the fifth largest in the world.

Pirelli Real Estate invests in property directly and manages a number of closed ended funds under its Pirelli RE SGR business, but has suffered in the downturn. In order to turn it around, it made around €68 million of structural savings last year and improved debt ratios.  

The company first listed on the Milan stock market in 2002 and manages about €16 billion of property in Italy, Germany and Poland, including non performing loans. Some €5 billion of the €15 billion is managed by its property funds.
Confirmation of the split today comes a few weeks after PERE revealed Pirelli Real Estate’s chief investment officer Olivier de Poulpiquet was joining Morgan Stanley, the bank he left in 2003 to join the Italian outfit.

In April last year, Pirelli Real Estate’s chief executive Carlo Puri Negri – the man widely credited with growing Pirelli Real Estate into a powerful player in Italian real estate – also departed.

At the time sources suggested the firm was still hopeful of raising an opportunity fund but those aspirations seems to have faded. It brought back Giulio Malfatto as managing director, who left the company in 2006 and was managing director of Pirelli RE’s fund management arm.