China National Chemical Corp is set to buy into Pirelli, the world’s fifth-largest tire maker for $7.7 billion or €7.1 billion. The deal will put the 143-year-old Italian company in Chinese hands. According to Reuters, the top shareholders of Pirelli agreed on Sunday. The offer will be launched at 15 euros per share, valuing the brand at 7.1 billion euros excluding net debt of almost 1 billion euros at the end of last year.
The deal is the latest in a series of takeovers in South Europe by Chinese companies taking advantage of the week euro. The deal means there will be a new global leader on the tire maker market with a market share of 10 percent, according to Swiss bank UBS. “The sale of a prized piece of our industrial system like Pirelli to foreign buyers would not be a drama in itself if Italian capitalism were able to face up to international competition and the government had an industrial policy,” the head of Italy’s biggest union, Susanna Camusso said.
See this Pirelli Diablo Rosso II tire: Pirelli Diablo Rosso II Motorcycle Tire
ChemChina is a state-owned company led by acquisitive Chairman Ren Jianxin and the production of tires is only a smaller division inside the corporation. According to Reuters, the Chinese will first enter into a joint venture which will buy the 26.2 percent stake Italian holding firm Camfin owns in Pirelli. This joint venture will then launch a takeover bid for the rest of Pirelli, said the press release. After the takeover, the Chinese will pick a new chairman. Pirelli boss Tronchetti Provera, who married a member of the Italian family that founded Pirelli in 1986, will remain chief executive.
There are some sings that other European companies will place counter-offers. The two other major players of tire production are Michelin from France and Continental from Germany but there’s no official word on possible counterbids yet. Most of Pirelli’s investors are backing the deal, that seems certain. And why? This deal means that the Italians can strengthen their positions against their larger French and German rivals while the Chinese can develop their automotive industry further.
Pirelli rear tire for the track: Pirelli Diablo Rosso Corsa Rear Tire – 180/55ZR-17/–