China National Chemical Corp (ChemChina) has agreed to purchase Italian tyre maker Pirelli, the world’s fifth-largest company in the sector, paying 7.1 billion euro ($7.7 billion).
Pirelli, one of the enduring symbols of Italy’s manufacturing industry will new be placed in Chinese hands, with the deal approved by Pirelli shareholders on Sunday. This also marks the importance of Italy for cash-rich Chinese companies, aiming to take advantage of the weaker Euro as the Old Continent is finally recovering economically. The state-owned ChemChina, which is ruled by the acquisition-prone chairman Ren Jianxin, will gain access to the necessary technology to manufacture and develop premium tyres, sold at higher margins and will also buoy the Italian tyre maker on the massive Chinese market. The Pirelli purchase also signals another resurgence of China’s state-owned enterprises (SOEs) appetite towards major deals after a pause triggered by President Xi Jinping’s anti corruption war that hit numerous former and current senior state-owned enterprise officials.
ChemChina’s tyre making division, the China National Tire & Rubber will initially purchase a 26.2 percent stake from Italian holding firm Camfin, triggering afterwards the mandatory takeover bid for the rest of the company’s shares. According to a Camfin statement, the purchase will be launched at 15 euros per share, by a vehicle controlled by the Chinese state-owned group and including Camfin investors, such as Pirelli chief Marco Tronchetti Provera, Italian banks UniCredit and Intesa Sanpaolo, and Russia’s Rosneft. The Italian tire making group will be valued at 7.1 billion euros, excluding the net debt tallied at the end of last year of around one billion euros.