Pirelli Starts Joint Venture with Russian Technologies in Russia

The agreement signed today with Sibur Holding entails the transfer to the joint venture being formed by Pirelli and Russian Technologies, by November 2011, of the Kirov plant, which has a current annual production capacity of more than 7 million passenger and LCV tyres, as well as a commitment to transfer further assets that should bring the annual production to 11 million units by 2014, for a total of €222 million, with a payment of €55 million in 2011 and €167 million in 2012.

Pirelli brand products can reach 50% of installed capacity and the JV’s core products will be winter tyres to be sold in the Russian and CIS markets.

The joint venture’s sales are expected to be around €300 million in 2012, and over €500 million in 2014. This will also be the result of investments of €200 million over the next 3 years, which will include the modernization of the plant and increasing the production capacity. Once the start-up phase is over, profitability is expected to be double-digit beginning from 2013.

Within the context of the agreements relating to the joint venture, Pirelli has the possibility of raising its stake in the JV from 50% to 75% through a 3-year put and call option mechanism.