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.