Chinese company to buy Italian tyre maker Pirelli in $7.7 bln deal

MILAN-Reuters

REUTERS Photo

China National Chemical Corp (ChemChina) is to buy Pirelli, the world’s fifth-largest tyre maker, in a 7.1 billion euro ($7.7 billion) deal that will place one of the symbols of Italy’s manufacturing industry in Chinese hands.

The deal agreed with Pirelli shareholders on March 22 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 that targeted several current and former senior SOE officials.

It would be China’s fifth-biggest outbound deal by an SOE, according to Thomson Reuters data, and the first major acquisition since China’s MMG Ltd 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 in Pirelli, and will then launch a mandatory takeover bid for the rest.

The bid will 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 in a statement.

The offer will be launched at 15 euros per share, valuing the group at 7.1 billion euros excluding net debt of almost 1 billion euros 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 15.23 euros - a sign that traders predict an improved offer or a rival bid.

Sources close to the matter said on March 20 the deal with the Chinese group will mean Rosneft, which is facing international sanctions due to the Ukraine crisis and needs to cut debt, reduces its stake in Pirelli.