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Pirelli To Buy Biccgeneral Energy Cable Activities In Europe, Africa And Asia

Milan, February 9th, 2000 -
Pirelli announces that an agreement has been reached with
BICCGeneral for the purchase of energy cable activities previously
owned by the British group BICC plc and taken over last year by the
American group General Cable.

In 1999 the activities to be purchased reached a
turnover of about Euro 700 million, with 3,500 employees and 11
factories located in the UK and Italy (which, together, accounted
for over 80% of the 1999 turnover) Africa and Asia, including a
joint-venture located in Shanghai, China, a priority area of
development for Pirelli Cables and Systems.

Pirelli will buy activities with a total net
worth of around $ 370 million for a total consideration of $ 216
million; the discount is related to the net fixed assets price of $
85 million compared to a net book value of $ 241 million. This
acquisition will raise the Cables and Systems turnover in the
energy business to about Euro 3,400 million. According to Pirelli’s
expectations, the activities to be acquired, which recorded a loss
on an hystorical cost basis for the full year 1999, will recover
positive results within 12 months, to then reach the performance
targets already scheduled for Pirelli Cables and Systems.

The power utilities market liberalisation and
the integration of the markets fostered also by the monetary union
are re-designing the competitive environment, opening up new
opportunities to suppliers of energy transmission and distribution
systems. The deal announced today allows a significant
strengthening of the activities to be acquired, by Pirelli
technological support and integration synergies.

Pirelli’s value creation objective will be
pursued also through manufacturing rationalizations – e. g. in the
UK utilities business, where Pirelli intends to focus on existing
BICC manufacturing units -and product portfolio integration.

Growing environmental requirements and
increasing demand in the energy field will generate more
opportunities for underground cables and distribution systems. In
this frame, Pirelli’s strategy is to create a strong European pole
for energy transmission, able to compete effectively in the global
market.

Larger R& D investments and focused technological synergies,
together with optimized local presences in the different countries,
will improve Pirelli Cables and Systems ability to offer innovative
solutions to the power utilities that are moving fast from national
to worldwide global players, enhancing more and more the concept of
energy networking.

“We are pleased to have reached agreement
with Pirelli to sell to them certain European, African and Asian
business units,
” said Stephen Rabinowitz, Chairman and CEO of
BICCGeneral. “The best long-term growth opportunities for
BICCGeneral are present in the acquired Iberian operations,
including Spain and Portugal; the Oceania operations, including New
Zealand and Australia; both North and South America. At the same
time, Pirelli is acquiring attractive assets at a reasonable cost
that will provide them with technically-advanced manufacturing
operations and access to new markets.”

“In a context where technology is more and more
the main competitive driver, our strategy”, said Giuseppe Morchio,
Chairman and CEO of Pirelli Cables and Systems, “is to grow and
strengthen, both through strategic alliances with excellent global
partners – such as Cisco in telecommunications – and through
acquisitions of high-tech activities, such as BICCGeneral in energy
transmission. This deal will further improve Pirelli positioning in
the world energy market leveraging on his technological leadership,
particularly in the submarine systems and terrestrial high-voltage
business”.

The completion of the acquisition is expected by June next,
subject to the approval by the competent EU and Antitrust
Authorities.

Categories: Institutional