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ChemChina, Pirelli Shareholder Reach Agreement

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chem-chinaA subsidiary of chemical, rubber and tire giant China National Chemical Corp. will make a takeover bid for Italian tiremaker Pirelli SpA, agreeing on Sunday to purchase the stake of Pirelli’s largest shareholder, according to reports from the New York Times and Reuters.

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The deal, which is expected to close during the summer, will give the ChemChina subsidiary, China National Tire and Rubber Co., access to Pirelli’s technology and expand Pirelli’s presence in China.

As part of the deal, Camfin, Pirelli’s largest shareholder, will sell its 26.2% stake in Pirelli to China National Tire and Rubber for a total of 7.1 billion euro (approximately $7.7 billion USD), the New York Times reported.

Camfin’s owners will then form an industrial partnership with China National Tire and Rubber and will reinvest part of the sale proceeds into a new Italian company, which will hold the Pirelli stake and initiate a takeover bid for all of Pirelli’s outstanding stock, offering €15 a share, the Times reported.

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An official statement confirming the reports that have been circulating for the last week explained that the agreement is designed to ensure that the operation and management team of Pirelli will remain relatively stable, Tyres & Accessories reported Monday.

China National Tire and Rubber will control the new company, while the Camfin investors will own as much as 49.9% of its capital, according to the Times report. The transaction is subject to approvals by the Chinese and foreign governmental authorities.

“We are delighted with the opportunity to team up with Marco Tronchetti Provera and his team to continue to build together a world class organization and a market leader in the global tire industry,” Jianxin Ren, chairman of ChemChina, told T&A.

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Once the deal is finalized, China National Tire and Rubber will choose a new leader, and CEO Marco Tronchetti Provera will remain chief executive, according to multiple reports.

“The partnership with a global player like ChemChina, through its affiliates, represents a great opportunity for Pirelli,” Provera told T&A. “CNRC’s approach to business and strategic vision guarantee Pirelli’s development and stability”.

According to Italian daily Corriere della Sera, Provera will still retain a degree of ownership and direction through Nuove Partecipazioni, which is controlled by Tronchetti and his allies. Under the new deal, Nuove Partecipazioni will own a share of 22.6% “Newco”, Pirelli’s new owners. The paper suggests ChemChina will own 65% directly, while Russian oil company Rosneft will retain 12.4%.

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In 2013, ChemChina’s annual total assets reached $43.907 billion, and 2014 global sales came in at $39.69 billion. With Pirelli’s estimated 2014 sales of $7.31 billion, the combined company would become the world’s largest tire and rubber firm with an estimated $47 billion in sales.

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ChemChina counts Aeolus, Yellow Sea, Double Happiness and Torch among its consumer, truck and OTR tire brands.

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