Paola Arosio and Danilo Masoni Milan
CHINA National Chemical (ChemChina) is to buy Pirelli, the fifth-largest tyre maker, in a e7.1 billion (R92.5bn) deal that will place one of the symbols of Italy’s manufacturing industry in Chinese hands.
The deal agreed with Pirelli shareholders late on Sunday is the latest in a string of takeovers in Italy by cash-rich Chinese buyers, who can take advantage of a weak euro just as signs emerge that Europe is coming out of economic stagnation.
It will give state-owned ChemChina, led by acquisitive chairman Ren Jianxin, access to technology to make premium tyres, which can be sold at higher margins, and give the Italian firm a boost in the huge Chinese market.
The bid for Pirelli marks a return of China’s state-owned enterprises (SOEs) to global dealmaking following a hiatus prompted by President Xi Jinping’s anti-graft crackdown.
It would be China’s fifth-biggest outbound deal by an SOE, according to data, and the first major acquisition since China’s MMG led a consortium last year to buy the huge Las Bambas copper mine in Peru from Glencore.
ChemChina’s tyre making unit China National Tire & Rubber will first buy the 26.2 percent that Italian holding firm Camfin owns, and will then launch a mandatory takeover bid for the rest.
The bid would be launched by a vehicle controlled by the Chinese state-owned group and part-owned by Camfin investors, who include Pirelli boss Marco Tronchetti Provera, Italian banks UniCredit and Intesa Sanpaolo, and Russia’s Rosneft, Camfin said.
The offer will be launched at e15 per share, valuing the group at e7.1bn, excluding net debt of almost e1bn at the end of 2014. The ChemChina unit also envisages taking Pirelli private.
As details of the deal were leaked on Friday, shares in Milan-listed Pirelli, which started business 143 years ago producing rubber items, rose to a 25-year high and closed at e15.23 – a sign that traders predict an improved offer or a rival bid.
Sources close to the matter said on Friday that the deal with the Chinese group would mean Rosneft, which is facing international sanctions due to the Ukraine crisis and needs to cut debt, reduced its stake in Pirelli.
More bandwidth
The agreement would give Beijing-based ChemChina access to technology used in making lucrative premium tyres and could help China, already a global player in sectors such as telecoms and internet, develop its automotive industry.
In turn Pirelli, whose tyres equip cars in Formula One motor racing, would have more bandwidth to compete against larger rivals such as Michelin and Continental, which are looking for growth in Asia.
Camfin said on Sunday Pirelli’s less profitable truck and industrial tyre business would be folded into ChemChina’s listed unit AEOLUS, allowing it to double its output.
The Chinese owners will pick a new chairman while Tronchetti Provera, who started working in the firm in 1986 after marrying a member of the Italian family that founded the firm, will remain chief executive.
“We’re pleased to have this opportunity working with Tronchetti and his team and continue to build together a world-class entity and a market leader in (the) global tyre business,” Ren said.
Previous Chinese acquisitions in Italy include stakes in power grid firms Terna and Snam, turbine maker Ansaldo and yacht maker Ferretti.
Excluding the financial sector, Italy is the second-biggest acquisition market for China in Europe and fifth-largest worldwide, with 10 deals completed since the start of 2014, according data.
Rothschild and ChemChina Finance advised ChemChina. JP Morgan advised China National Tire & Rubber, while Lazard was the financial adviser to Camfin. – Reuters