China National Chemical Corp will purchase Italian tire maker Pirelli for $7.7 billion; to take advantage of weak Euro
China National Chemical Corp will purchase Pirelli. This Italian company is the world’s fifth-largest tire maker. This acquisition is valued at a 7.1 billion euro ($7.7 billion). But this deal is not just about money; it will place one of the symbols of Italy’s manufacturing industry in the hands of Chinese manufacturers.
This acquisition deal which was agreed by Pirelli shareholders on Sunday is one of the most recent in as string of takeovers in Italy by Chinese buyers. This is also a move that takes advantage of a weak euro.
This buy out will also give state-owned ChemChina, which is led by acquisitive chairman Ren Jianxin, the ability to create high quality tires using updated technology. It is expected that products will be sold at higher margins as a result and give the Pirelli pole position in the huge Chinese market.
ChemChina’s China National Tire & Rubber, its tire-making arm, will first buy the 26.2 percent that Italian holding firm Camfin owns in Pirelli. Afterwards it will launch a mandatory takeover bid for the rest. The bid will be launched by the Chinese state-owned group and part-owned by Camfin investors. This includes Pirelli boss Marco Tronchetti Provera, Italian banks UniCredit and Intesa Sanpaolo, and Russia’s Rosneft. .
The acquisition 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. As details of the deal were mentioned on Friday, shares in Milan-listed Pirelli, rose to a 25-year high and closed at 15.23 euros. Experts believe that this is a sign of an improved offer or a rival bid.
Pirelli, whose tires are primarily used in Formula One motor racing, would have more bandwidth because of this recent activity. This will allow it to compete against larger rivals such as Michelin and Continental, brands that are dreaming of making a huge name in China.
The new Chinese owners will choose a new chairman. Tronchetti Provera 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 tire business,” Ren said in a statement.
By A.L. Mijares
China National Chemical Corporation (ChemChina) is a large State-owned enterprise under the administration of SASAC and established in May 2004 with the approval of the State Council. ChemChina is in the list of Fortune 500 and China’s largest chemical company and ranks 19th among the world’s top 100 chemical corporations. The main business of ChemChina is made up of six sectors: new chemical materials; basic chemical materials; oil processing; agrochemicals; rubber products; chemical equipment. ChemChina is implementing the 12th Five-year Plan and accelerating industrial restructuring. In the future, it will form a business layout of “3+1”, namely: materials science, environmental science and life science plus basic chemical. It strives to become a world-class chemical company with international competitiveness.
About Ren Jianxin
Ren Jianxin, born in 1958, graduated from the economics department of Lanzhou University, with a major in business management. He has a Master’s in economics, and is a Professor of Engineering. In September 1984, Ren founded China’s first professional cleaning company. He held the following posts: general manager and secretary of the CPC at the BlueStar Chemical Cleaning Group; deputy general manager of the China National Chemical Equipment Corp; and vice president of China Haohua Chemical (Group) Corp.
In May 2004, after the China National Chemical Corp was founded, Ren was general manager and deputy secretary of the CPC, at the China National Chemical Corp. Since December 2014 he serves as Chairman and Party Secretary of ChemChina.
Pirelli & C. SpA is a multinational company based in Milan, Italy, listed on Milan Stock Exchange since 1922. The company, the world’s fifth-largest tire manufacturer behind Bridgestone, Michelin, Continental and Goodyear. Pirelli has been sponsoring sport competitions since 1907 and is an exclusive tire supplier for the Formula One Championship for 2011-2016 and for the FIM World Superbike Championship.
Pirelli stock market evolution: http://www.reuters.com/finance/stocks/overview?symbol=PECI.MI
About Tronchetti Provera
Marco Tronchetti Provera is an Italian businessman. As of 2014 he is Chairman and Chief Executive Officer of Pirelli & C. S.p.A., Chairman of Pirelli Tyre S.p.A., and Chairman of the holding Marco Tronchetti Provera & C. S.p.A., which he controls, and up to December 2013 he was also Chairman of Camfin S.p.A., the main shareholder in Pirelli & C. S.p.A. He is Deputy Chairman of the Board of Mediobanca SpA, a member of the executive committee of Italian industrialists’ association Confindustria and sits on the International Advisory Board of insurance company Allianz.