The European Union has given tyre-maker Pirelli the all clear to take over telecoms firm Olivetti, under certain conditions.

This effectively gives Pirelli control over Italy's largest telecoms group since Olivetti owns Telecom Italia.

But the deal has been negotiated on condition that Pirelli's partners give up conflicting interests.

These conflicting interests include Edizone Holding selling its shareholdings in Blu, one of Italy's four mobile phone operators.

Sweetened deal

The EU announcement came as investors were still assessing over a complex financing deal announced earlier this week.

Pirelli has become one of the first big firms successfully to renegotiate a past takeover deal in the gloomier economic mood after the US terror attacks.

The Italian giant said on Tuesday that it wanted to review the terms of its 7bn euro (�4.4bn) takeover of Olivetti, the firm that controls Telecom Italia, the country's main telephone company.

On Wednesday, Pirelli unveiled a complex agreement with Bell, an Olivetti shareholder, that effectively sweetens the deal without cutting the acquisition price.

Shares in Olivetti have halved in value since Pirelli agreed to buy a controlling stake in the company in July.

The tyre-maker joins a growing list of European companies reviewing their acquisition plans amid concerns that the world economy may be slowing more than expected following last week's attacks.

Bell bond

The Pirelli-Bell agreement is fiendishly complicated.

Bell has agreed to buy a 2,000bn lire (�653m; $958m) bond convertible into Olivetti shares.

The six-year bond will be issued by Olimpia, the investment vehicle set up by Pirelli and the Benetton family's Edizione Holding to acquire Bell's 23% Olivetti stake.

Two Italian banks, Monte Paschi and Banca Antonveneta, will grant Olimpia up to 2,000bn lire in six-year loans, Pirelli said in a statement.

Financial trickery

The headline price Pirelli is paying for Olivetti shares - just over 4.1 euros per share - remains the same.

But thanks to complex financial engineering, analysts reckon that Pirelli will achieve something like a 10% discount on the second of two tranches of Bell's Olivetti shares.

Effectively, Bell will help subsidise the share sale, and at a an interest rate favourable to Pirelli.