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Pirelli Selling US Fiber Optics Operation to Corning

[Milan, Italy] Cable company, Pirelli Spa, announced that it has reached an agreement with Corning for the sale of share capital in Optical Technologies totaling over $3 billion.

Pirelli currently owns 90 percent of Optical Technologies, a Delaware-based company manufacturing optical components. The remaining 10 percent is owned by Cisco Systems.

In a company statement, Pirelli said, "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 of approximately $3.43 billion, and a contingent payment of up to $180 million based upon the achievement of certain business milestones."

Pirelli's total cash intake from the venture, based on company reports, will be $3.05 billion, considering a 12.5 percent stock options granted to management, special closure benefits, and the cost related to the agreement itself.

The Pirelli-Corning deal comes after collapsed talks between the latter company and Nortel Networks Inc. In the discussions, the two companies were to blend their fiber-optic business and market it under the Corning brand.

Corning Incorporated, which had 1999 revenue of $4.7 billion, creates leading-edge technologies for global markets. It manufactures optical fiber, cables and photonic products for the telecommunications industry and high-performance displays and components for television and other communications-related industries.

Reuters reported that Corning has been struggling to meet customer demand for high-speed voice and data transmission equipment, as well as increase manufacturing capacity and develop greater product offerings.

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