Funds in talks for stake in Pirelli holding - sources

MILAN Fri Nov 16, 2012 1:33pm EST

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MILAN Nov 16 (Reuters) - Two Italian private equity funds are in talks about investing in a holding company that jointly owns Pirelli, people familiar with the situation said on Friday.

The funds, Investindustrial and Clessidra, will be working on a potential deal this weekend but are unlikely to reach an agreement by Monday, the sources said.

Pirelli chairman Marco Tronchetti Provera controls the tyremaker through a complex structure involving three interlocking holding companies: MTP Sapa, GPI, and the Milan-listed Camfin.

The two funds would invest 40-60 million euros in Tronchetti Provera's family holding MTP Sapa.

That would in turn allow Tronchetti Provera to subscribe to a capital increase in GPI, enabling him to keep control of Pirelli, the world's fifth-largest tyremaker with a market capitalization of 3.96 billion euros.

"They are in talks," said one of the people. "They will be working on it all weekend, but Monday is a bit too soon for anything to be signed."

A second source described the situation as "fluid".

"Not all the details are in place, there are a few aspects still to sort out. It's hard to imagine them wrapping it up by Monday," the source said.

GPI declined to comment. Pirelli was not immediately available for comment.

GPI approved a capital increase of 45 million euros in September to repay bank debt of 41 million euros coming due in November.

Tronchetti Provera has a 55 percent stake in GPI through MTP Sapa and the cash injection from the two funds would ensure that his holding does not get diluted by the cash call.

Italian companies including Fiat, Mediaset, and CIR are also held through unlisted holding companies, which enables families to control listed companies with a smaller amount of capital than they would need for a direct stake.

The funds' investment foresees: "a streamlining of the chain of holding companies, from both a financial and a governance point of view," one of the sources said.

The other investor in GPI is Malacalza Investimenti with a 30.94 percent stake. (Reporting by Massimo Gaia, writing by Jennifer Clark)

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