Pirelli share price down, Rosneft acquires a stake in Italian tire maker in a 500-million-euro deal

Pirelli & C. SpA made an official statement today, revealing that the largest oil producer in Russia – NK Rosneft OAO has agreed to become Pirellis biggest investor by acquiring an indirect stake in the company. The deal is estimated to about 500 million euros (695 million dollars).

Lauro61/Camfin, which is an investment group owning about 26% in Pirelli & C. SpA is said to dissolve and create a new entity. Rosneft has agreed to acquire 50% of the new entitys stock. According to a person with knowledge of the deal, who asked not to be identified, because the details of the agreement are not final, Rosneft will also take over part of Camfins debt. The company is said to be focused on strengthening its business in Russia, and the deal is considered as a step that is to bring security to the shareholder structure of Pirelli, the fifth-largest tire maker by sales in the world.

One of the analysts, who work for Mediobanca wrote in a report to customers, which was cited by Bloomberg: “The deal significantly reduces the speculative appeal of the stock.”

As reported by the Wall Street Journal, according to a person with knowledge of the process, the private-equity firm Clessidra SGR SpA will be purchased by Rosneft under the terms of the preliminary agreement between the two companies. The latter will acquire part of the indirect stakes of UniCredit SpA and Intesa Sanpaolo SpA, investing about 500 million euros in the deal.

The Financial Times reported that Rosneft commented on the deal saying that such an agreement would “strengthen relations with Pirelli” as well as the plans of both companies “to expand their joint international projects”.

Finalizing the deal is also considered helpful for Pirelli, which has been trying to impose an aggressive strategy in the emerging markets for years now, to acquire more stable positions in Russia. The company is reported to generate only about 6% of its overall sales on the Italian market. Its business is growing quite fast in China, Latin America and Russia.

Pirelli & C SpA fell by 3.16% to 11.66 euros in Milan by 14:28 GMT, marking a one-year change of +38.97%. The company is valued at 5.85 billion euros. According to the Financial Times, the 17 analysts offering 12 month price targets for Pirelli & C SpA have a median target of 12.00 euros, with a high estimate of 14.50 euros and a low estimate of 8.00 euros. The median estimate represents a -0.33% decrease from the previous close of 12.04 euros.

NK Rosneft OAO jumped by 0.45% to 225.81 rubles in Moscow and is valued at 2.39 trillion rubles.