MILAN, Italy (Feb. 28, 2014) — Pirelli & C. S.p.A. has agreed to sell its steel-cord business to Belgium's Bekaert S.A., considered the world's No. 1 independent steel-cord maker, for $350 million.
The business comprises five steel cord facilities, located in Italy, Turkey, Romania, China and Brazil, and represents annual sales of $410 million, according to the two firms. The closing, subject to regulatory approvals, is expected in the second half of the year.
The deal will allow Pirelli to exit a business where it said it "lacks competitive scale" and instead will be able to focus resources on its higher-margin premium tire activities.
After the sale, Bekaert will continue to supply Pirelli long-term, and the two companies intend to conduct joint product development to enhance research and development, Pirelli said, "ensuring that the transition to the new arrangement meshes smoothly with their respective growth and development plans…."
The plants are located in: Figline Valdarno, Italy; Slatina, Romania; Izmit, Turkey; Yanzhou, China; and Sumarè, Brazi. The deal includes all of the personnel and assets of the respective entities, Bekaert said.
Pirelli has been evaluating a possible sale or spinoff of the steel-cord business since mid-2013.
At that time, South Korea's Hyosung Group reportedly had approached Pirelli about partnering in or taking over Pirelli's tire reinforcement materials business.
It is worth noting that the cash-in and profit-loss impact related to this operation were not included in the forecasts provided in Pirelli's industrial plan, which was presented to investors last November.
Pirelli's advisers for the operation were HSBC and Banca IMI.
Kortrijk, Belgium-based Bekaert describes itself as a "market and technology leader" in steel-wire transformation and coatings. Fiscal 2013 sales were $4.23 billion. Steel-cord and –wire reinforcements for rubber products represent about 38 percent of that.
Bekaert claims "one in every four tires in the world is reinforced" with its products.