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LONDON-The European Commission has approved a £2 billion ($3.2 billion) joint venture between Morgan Stanley, Pirelli and Telecom Italia/Olivetti.

The decision effectively dismisses opposition from other Italian funds who had argued that a portfolio of that size concentrated in Rome and Milan would create a monopoly in land and be anti-competitive.

The complex deal sees Pirelli SpA and the Telecom Italia/Olivetti group pool £2 billion ($3.2 billion) of offices and land. Former parent company Pirelli & C will take a 25% stake through its joint venture with Morgan Stanley Real Estate Funds.

The move forms part of Telecom’s strategy of selling off non-core assets to cut its £23 billion ($36.8 billion) debt.

But it also enables Pirelli to bolster its real estate portfolio ahead of a possible flotation later this year and allows the company to take advantage of a change in Italian law, reducing the tax burden on closed-end property funds.

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