China Buying Into Tyre Maker Pirelli In $9.8bn Deal

The state-owned China National Chemical Corp (ChemChina) will buy into Italian company Pirelli, the world’s fifth-largest tyre maker, as part of a wider 7.1 billion euro (AU$9.1bn) bid.

The deal, among the largest-ever by a state-owned Chinese company for a foreign property, will see ChemChina take over the 26.2 percent stake currently owned by Italian holding form Cam Finanziaria (Camfin).

ChemChina, through it tyre making unit China National Tyre & Rubber, will then launch a bid for the remaining shares, in cooperation with Camfin and its investors, which include Pirelli chief Marco Tronchetti Provera, the UniCredit and Intesa Sanpaolo banks and Russia’s Rosneft.

The offer will launch at €15 per share, valuing the group at €7.1bn - excluding net debt of almost €1bn.

ChemChina plans to take Pirelli private, meaning it and partner Camfin will need to secure 90 percent of the company’s stocks.

If successful, the deal will give ChemChina access to a premium grade of tyre manufacturing, well beyond the quality of its Aeolus brand, which ranks 23 among global tyre brands and has little presence outside of China.

Importantly for Pirelli, the deal would give the Italian brand a significant leg-up in China, where Europe’s top tyre makers Michelin and Continental are also looking for expansion opportunities.

The deal may not be easily struck, however, with reports of the offer last week moving Pirelli shares to a 25-year high of €15.76 before closing at €15.5 today.