ChemChina To Buy Tire Maker Pirelli

Chinese state-owned chemical conglomerate ChemChina has reached a deal to purchase a controlling interest in Italian tire maker Pirelli for $7.7 billion. The aggressive move would give the Chinese firm a global tire network in 140 countries with sales of more than $6.5 billion.

The transaction will come through a ChemChina subsidiary, China National Tire & Rubber Corp., which describes itself as China’s domestic leader in steel radial tire and off-road tire production. The deal would give the Chinese tire-making subsidiary access to the 140-year-old Italian tire maker’s R&D, manufacturing, and sales footprint.

Ren Jianxin, ChemChina’s chairman, says the deal will create a “world-class organization and a market leader in the global tire industry.” As a result, ChemChina will be able to play a leading role in the industry alongside rivals Bridgestone of Japan, Germany’s Continental, France’s Michelin, and the U.S. maker Goodyear.

In a two-step deal, ChemChina will first purchase the 26.2% stake in Pirelli owned by Italian holding firm Camfin. Then, joining with Camfin and other investors, ChemChina plans to buy the remainder of Pirelli’s publicly held shares.

ChemChina is no stranger to large international business transactions. In 2011, it bought the Israel-based agrochemicals maker Adama Agricultural Solutions for $2.4 billion, and in 2006 it bought Rhodia’s silicones business, now known as Bluestar Silicones, for about $500 million.