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Press Release

Milan, December 12, 2000. Pirelli, after
the Antitrust Authorities’ approval, confirmed today that the
closing of the agreement with Corning Inc. regarding the sale of
optical components’ activities has taken place, as announced on 27
September 2000.

The transaction was completed with the transfer
to Corning of 90% of the share capital of Optical Technologies USA
Inc. and the payment to Pirelli of US $ 3,61 billion, which
includes US $ 180 million for the attainment of pre-established
business targets and US $ 100 million for the sale of other assets
wholly owned by Pirelli Cavi e Sistemi SpA.

For any other details, a copy of the Press
Release dated 27 September 2000 is attached.

* * *

The closing of the Corning operation is the
crowning-piece of a very special year for the Pirelli Group; in
fact, according to the latest forecast, it will end with
unprecedented results in terms of growth in sales revenues,
gross operating profit and net profit, as well as with a
strengthened financial position thanks to the successful outcome of
the two Cisco and Corning operations, which have allowed the Group
to cash roughly 10 thousand billion lire during the course of the
year. A year which will be remembered also for the following:

  • The completion of the strategic alliance with Cisco
    Systems in optical technologies, which allows the Group’s strategic
    positioning to be optimized;
  • The strengthening of optical fibre and cable activities,
    that are witnessing an explosion in demand particularly on the
    North American market, where Pirelli’s share is about 20%;
  • The start-up of new technologies in the Tyre Sector,
    with its proprietary MIRS manufacturing process which is expected
    to reshape the whole industry and, in Cables and Systems, with the
    energy cables undergrounding technology aimed at eliminating
    electromagnetic and environmental pollution;
  • The launch of the e-Pirelli Project with investments of
    up to 2 thousand billion lira in the 2000-2002 period, to radically
    transform the Group and transfer all company processes on-line, and
    with a Y2000 on-line sales target of over one billion Euro which
    was already reached in November;
  • The acquisitions of BICCGeneral energy cable activities
    with 11 factories in Europe, Asia and Africa, and NKF’s with 2
    factories in the Netherlands and Finland, which have allowed the
    Pirelli Group to become world leader in the energy transmission
  • The launch of Public Purchase Offers for all the
    outstanding shares of the Brazilian associated companies Pirelli
    Cabos S.A. and Pirelli Pneus S.A. and of the Australian associated
    company Pirelli Cables Australia LTD, and their subsequent
  • Finally, taking into consideration the prevailing presence
    outside Italy of the Group’s operating activities, the increasingly
    decisive role played by international capital markets and the ever
    faster management speed called for by the New Economy, it was
    decided, and is currently under way, to transfer to London
    all Treasury activities and Relations with investors and the
    financial community. The significant liquidity resulting from the
    Corning operation, earmarked to give an additional boost to the
    Group’s international competitiveness, is an element that reaffirms
    such a decision. The new base is in Grosvenor Street, London

Press Release 27.9.2000

Milan, September 27, 2000 – Pirelli and
Corning, the two long lasting partners in the optical technology,
announced today to have reached an agreement for the sale to
Corning of the share capital of Optical Technologies – the American
company manufacturing optical components based in Delaware – for
USD 3.9 billion plus other assets for USD 100 million. The company
shareholding is held 90% by Pirelli SpA and 10% by Cisco Systems,
while the other assets are fully owned by Pirelli Cables and

As already announced last March, the Pirelli
strategic aim was to proceed with an IPO in order to allow the new
company to benefit from the opportunities offered by the US market
in terms of finance, customers and technologies: an aim which is
now fully achieved through this transaction.

According to the agreement, which has been
approved by the Boards of Directors of the two companies, at the
closing of the transaction, which is expected in 2-3 months being
subject to customary Antitrust Authorities approval, Corning will
correspond to Pirelli an initial payment for the above mentioned
transaction of approx. USD 3.43 billion, and a contingent payment
of up to USD 180 million based upon the achievement of certain
business milestones. The net income for Pirelli will be of about
USD 3.05 billion taking into account: the stock options granted to
the management (equal to 12,5% of the capital); special benefits
granted for the positive conclusion of the deal; and the costs
related to the deal itself. The tax charge of the overall
transaction, including the transfer of assets already realised in
view of the IPO, can be estimated in the range of ITL 1 thousand

Thanks to this agreement, Pirelli will reinforce
its leading technologies in optical fibres, optical cables and
submarine optical systems, in energy transmission and in tires, and
will capture any further opportunity to create additional

* * *

For a full brief on the subject, Pirelli SpA
will hold a press conference today (Wednesday 27 Sept.) at 14.00
p.m. in Milan, via G. Negri 10.

* * *

Established in 1851, Corning Incorporated
( creates leading-edge technologies for
the fastest-growing markets of the world’s economy. Corning
manufactures optical fiber, cables and photonic products for the
telecommunications industry; and high-performance displays and
components for television and other communications-related
industries. The company also uses advanced materials to manufacture
products for scientific, semiconductor and environmental markets.
Corning’s revenues in 1999 were $ 4.7 billion.