Rumours are rife that Pirelli is about to separate its tyres activities from its listed real estate unit, according to a Reuters report.
The news has given the Italian company a boost at a time when the financial results of its tyres unit are looking up.
Pirelli could resuscitate its 2007 plan to spin off its tyre unit — though not this time via an initial public offering — and separate it from its listed real estate company, analysts and investment bankers said.
According to an Equita broker: “We believe some recent moves at the corporate level are clear pointers that will lead to a separation of Pirelli & C Real Estate PECR.MI from the group to transform Pirelli & C from a holding company to a tyre maker.”
Pirelli lags tyre peers Michelin and Continental in terms of market cap — Pirelli’s 2 billion euros is about a quarter of Michelin’s — but is active in high margin tyre sectors and in emerging markets.
In the second quarter tyre unit earnings before interest and tax and after restructuring charges rose to 79.3 million euros from 57.5 million in the first quarter.
Expectations both of a split and improvements in tyre unit financial results pushed Pirelli & C’s stock price to a year-high earlier in October.
The share price move reflects belief among investment bankers that Pirelli will go for a full separation of the Pirelli & C holding from its 56-percent real estate unit but the deal will take time to mature.
“In the end they will do it. The two businesses (tyres and real estate) don’t go together. In a time of crisis companies focus on their core businesses,” a leading financial adviser said.
Denna Bowman, Head Office