Corning To Buy Pirelli's Optical Business For $3.6 Billion

By BridgeNews Corning Inc., the Corning, N.Y., maker of fiber-optic cable, has agreed to buy Pirelli SpA's Optical Technologies unit for US$3.6 billion in cash, the two companies announced this week. Corning will acquire 90% of the Milan-based Optical Technologies business, which makes components for fiber-optic communications networks. The remaining 10% is held by Cisco Systems Inc. "The transaction will give Pirelli a huge capital gain that will surely impact the next balance sheet," says Patrizio Pazzaglia, fund manager with Nusa Sim in Rome. "In this market phase, it's better not to put off to tomorrow what can be done today." Pirelli said it expects to raise a net $3.05 billion from the deal, taking into account options given to the management. Corning will initially pay $3.4 billion, with a possible further $180 million payable according to performance. Corning expects the acquisition to reduce earnings per share by less than 5% in 2001 and to improve earnings after that. The company will finance the deal with the proceeds of the issuance of a combination of equity and convertible debt securities. Corning's Chairman and CEO, Roger G. Ackerman, says the deal would add significantly to Corning's capabilities in the optical communications sector.

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