The Olivetti-Telecom Italia Group transferred real estate assets worth around EUR 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 EUR 70 million from the operation, as well as generating a positive pre-tax financial impact in the order of EUR 165 million from aggregate assets transferred corresponding to around EUR 225 million.
For Telecom Italia, following the transfer of assets worth around EUR 1,360 million to Tiglio I and Tiglio II (of which approximately EUR 50 million belonging to Seat Pagine Gialle, around EUR 840 million in real estate assets taken on from Imser and around EUR 470 million in other real estate assets transferred), for the current year the operation will have a positive pre-tax economic impact of around EUR 220 million for Telecom Italia S.p.A. and an impact of around EUR 5 million for Seat Pagine Gialle (making a total of EUR 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 EUR 330 million (of which EUR 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 EUR 225 million and EUR 690 million respectively by the time this process is completed (of which over EUR 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 EUR 2.9 billion, led to the foundation of Telemaco Immobiliare (recipient of assets worth around EUR 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 EUR 160 million and a positive pre-tax financial impact in the order of EUR 225 million. The operation has also included the foundation of Im.Ser (with real estate assets worth in the order of EUR 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 EUR 1,220 million to the Beni Stabili Group and of around EUR 820 million to
