UPDATE 2-Rosneft gets 13 pct of Pirelli as Italian assets lure interest

Mon Mar 17, 2014 11:26am EDT

* Deal values Pirelli shares at 12 euros/shr, banks say

* Rosneft to own 50 pct of holding group controlling Pirelli

* CEO's vehicle to keep powers to appoint chairman, CEO

* Shares down 3.2 pct, deal ends speculation of possible bid (Adds details, analysts)

By Agnieszka Flak and Paola Arosio

MILAN, March 17 (Reuters) - Oil major Rosneft has agreed a deal giving it control over a 13 percent indirect stake in Pirelli SpA, making the Russian group the single biggest shareholder in the world's fifth-largest tyremaker.

The deal with a group of Italian shareholders is the latest acquisition in Italy by foreign players snapping up assets there as the country shows signs of emerging from its longest recession in 70 years.

The investment will boost Rosneft's foothold in western Europe, even as East-West tensions rise after Crimea voted in a referendum in favour of joining Russia.

It also coincides with a group of investors led by Russian tycoon Mikhail Fridman agreeing to buy German utility RWE AG's oil and gas production arm DEA. None of the companies involved in the two deals mentioned the Crimea situation as a likely threat to their completion.

Investors said on Monday the agreement put a value of 12 euros apiece on Pirelli shares, which traded down 3.2 percent at 11.66 euros by 1429 GMT compared with a 1 percent rise in Milan's blue-chip index.

Traders said profit-taking had kicked in as the deal ended speculation of a possible bid for Pirelli that had lifted shares over the past few weeks.

The deal cements a marketing and commercial agreement signed between Pirelli and Rosneft in December 2012. For Pirelli, Russia is seen as a key growth market, while for Rosneft it is part of a rapid expansion after Igor Sechin, an ally of Russian President Vladimir Putin, took the helm in 2012.

"This is a strategic partnership - for Rosneft it is diversification of its own business, not just a portfolio investment," said Andrey Polischuk, an analyst with Raiffeisenbank in Moscow. "For Pirelli it is also an opportunity to expand its business in Russia."

DISTRIBUTION NETWORK

Under the terms of the deal, Rosneft will own 50 percent of a new holding company that will have 26.2 percent of Pirelli.

The remaining 50 percent of the holding company will belong to a financial group 80 percent owned by Nuove Partecipazioni, an investment vehicle belonging to Pirelli Chairman and CEO Marco Tronchetti Provera. The other 20 percent will be split between Italian banks Intesa Sanpaolo and UniCredit .

The companies involved did not disclose financial details of the deal. A source with direct knowledge of the deal said Rosneft would invest more than 500 million euros ($696 million) in cash and would take on about 250 million euros of debt.

Analysts said Rosneft's extensive distribution network would give Pirelli the ability to expand in a key market for premium tyres, a segment that has allowed the Italian company to weather a European automotive sector downturn. Pirelli made just 4 percent of its total sales last year in Russia, where Finnish rival Nokian Renkaat has been investing for decades in building its distribution network.

The deal also removes uncertainty over Pirelli's governance, after a lengthy wrangling between Tronchetti and other Italian investors.

Tronchetti is likely to remain at the helm of Pirelli since his Nuove Partecipazioni vehicle will keep the powers to appoint Pirelli's chairman and CEO. Those powers are valid for five years, two sources close to the matter said.

Other recent international investments in Italian assets include BlackRock Inc, the world's largest money manager, raising its stake in UniCredit SpA to become the Italian bank's largest shareholder.

Previous expansion moves by Rosneft include its purchase of Anglo-Russian TNK-BP; it also has agreements with various European energy groups on exploring for oil and gas in Russia's Arctic, holds a 50 percent stake in four Ruhr Oel refineries in Germany and has 21 percent in Italian refinery Saras.

($1 = 0.7181 Euros) (Additional reporting by Valentina Za and Isla Binnie in Milan, with Christoph Steitz in Frankfurt and Vladimir Soldatkin in Moscow; Editing by Lisa Jucca and David Holmes)

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