GROSS CAPITAL GAINS OF €70 MILLION FOR OLIVETTI
POSITIVE IMPACT ON EARNINGS OF €220 MILLION FOR TELECOM ITALIA AND €5 MILLION FOR SEAT PG
POSITIVE FINANCIAL IMPACT OF AROUND €495 MILLION (TELECOM ITALIA €290m, SEAT PG €40m AND OLIVETTI €165m)
The Olivetti-Telecom Italia Group today transferred real estate assets worth around €1,585 million to Tiglio I and Tiglio II, two real estate companies controlled by the Morgan Stanley Real Estate Funds.
The Olivetti-Telecom Italia Group is to retain minority shareholdings in these companies commensurate with the value of the assets transferred. Specifically, Olivetti will be retaining 8.84%, Telecom Italia 36.85% and Seat Pagine Gialle 2.1% of Tiglio I, while Telecom Italia is to hold a 49.47% stake in Tiglio II following the transfer of the company´s assets management unit.
Olivetti is to realize gross capital gains of around €70 million from the operation, as well as generating a positive pre-tax financial impact in the order of €165 million from aggregate assets transferred corresponding to around €225 million.
For Telecom Italia, following the transfer of assets worth around €1,360 million to Tiglio I and Tiglio II (of which approximately €50 million belonging to Seat Pagine Gialle, around €840 million in real estate assets taken on from Imser and around €470 million in other real estate assets transferred), for the current year the operation will have a positive pre-tax economic impact of around €220 million for Telecom Italia S.p.A. and an impact of around €5 million for Seat Pagine Gialle (making a total of €370 million at consolidated Telecom Italia Group level). The pre-tax financial impact on the Telecom Italia Group during the current year corresponds to around €330 million (of which €40 million pertaining to Seat Pagine Gialle). These sums are in addition to the capital gains realized in 2000 generated by the real estate spin-offs undertaken that year.
Today´s real estate transfers constitute the executive phase of the agreement struck in recent months between the Olivetti-Telecom Italia Group, the Pirelli Group and companies controlled by the Morgan Stanley Real Estate Funds. Among other elements, the agreement calls for realization of the value of Tiglio I and Tiglio II assets during 2003 through market operations undertaken as part of a strategy designed to contribute to financial real estate market growth and offer significant opportunities for the Olivetti-Telecom Italia Group to achieve optimum realization of value from residual stakes held in these two vehicles in the wake of today´s transfers.
Cautious estimates regarding monetization of equity stakes in Tiglio I and Tiglio II over the next few years, at values commensurate with the transfer value of these assets and inclusive of amounts realized in 2002, see Olivetti and Telecom Italia generating liquidity prior to tax corresponding to around €225 million and €690 million respectively by the time this process is completed (of which over €50 million accruing to Seat Pagine Gialle).
For Telecom Italia, today´s move essentially completes the realization of value from the Group´s most valuable real estate assets. This is part of a process that began in 2000 with spin-offs undertaken in accordance with the strategy to focus on core business. The operation, involving assets worth around €2.9 billion, led to the foundation of Telemaco Immobiliare (recipient of assets worth around €850 million and initially 45%-owned by Beni Stabili, 40%-owned by Telecom Italia and 15%-owned by Lehman Brothers). The recent sale of Telemaco Immobiliare to WhiteHall (Goldman Sachs funds) generated pre-tax gains for Telecom Italia S.p.A. of around €160 million and a positive pre-tax financial impact in the order of €225 million. The operation has also included the foundation of Im.Ser (with real estate assets worth in the order of €2,050 million, 60%-owned by Beni Stabili and 40%-owned by Telecom Italia), which in the last few days underwent a split with the assignment of assets with a book value (prior to depreciation) of around €1,220 million to the Beni Stabili Group and of around €820 million to the Telecom Italia Group. As previously announced, the Telecom Italia Group passed on these assets to the Tiglio venture.
At the same time as these latest moves, Olivetti Multiservices and Telecom Italia have completed the transfer of their real estate services units (excluding facilities management) to the Pirelli & C. Real Estate Group, which is to integrate these units into the company’s specialist in-house structures. This restructuring of services operations, which will see around 170 members of staff moving to the Pirelli Group, has been implemented through the disposal of Telecom Italia and Olivetti Multiservices property management, project management and agency units in exchange for a price equal to around €15 million for Telecom Italia and €3 million for Olivetti Multiservices. These values were established on the basis of independent assessments arranged by KPMG.
Plans are currently under preparation to concentrate Telecom Italia and Olivetti Multiservices facility management operations through the establishment of a new company that will be large enough and have the requisite expertise to become a leader on the Italian market.
Lazard Real Estate has served as financial advisor to Olivetti and Telecom Italia; Studio Chiomenti has been legal advisor in this operation.