Pirelli CEO addresses ChemChina deal

New York – China National Chemical Corp.’s bid to take control of Pirelli & C. SpA is first and foremost a deal to secure the future of Pirelli’s commercial tire business interests, Pirelli CEO Marco Tronchetti Provera said in a 2 April  conference call with the US tire trade media.

Combining Pirelli’s truck and farm tire assets with those of ChemChina’s National Tire & Rubber Co. subsidiary will create an entity that Tronchetti Provera said would be the fourth largest commercial tire business globally. Tire Business, a sister publication of European Rubber Journal, estimates this entity would generate annual sales of about $3 billion.

Throughout the half-hour conference call, Tronchetti Provera stressed that Pirelli’s consumer tire business—car, light truck/SUV and motorcycle—would remain separate from any of ChemChina’s operations.

“ChemChina per se is not a tire company,” the executive said. “ChemChina will not have a penny in Pirelli directly.”

He stressed that Pirelli’s strategy of producing locally for local consumption will continue, noting the billions of dollars of investment Pirelli has made in modern plants in China, Italy, Mexico and Russia.

Tronchetti Provera also confirmed that the deal to merge the industrial tire assets would go forward no matter what

He said he expects the deal to go through by this summer—June or July—and to be cleared by a September/October timeframe

Addressing stock market concerns that ChemChina’s bid of 15 euros per share is solid and fixed, he stressed that he’s confident that after the market speculation wanes, the bid will be sufficient.

Other comments from the call included:

• The uneasy political situation in Russia—where Pirelli has made a measurable investment to buy into and expand manufacturing capacities for the Russian/Eastern European markets—did not influence the decision to pursue the business deal with ChemChina.

• Pirelli is not concerned that being controlled by Chinese investors will have any negative effect on the consumer tire business. “We have a very strong presence in the prestige markets, and supply the top vehicle makers globally, including in China.”

• The deal should have no effect on Pirelli’s motorsports engagements, including its exclusive supply arrangement with Formula 1, which runs through the 2016 season.

Tronchetti Provera stressed that the provisions of the deal call for him to remain CEO for five years and that he will have be able to re-list the company’s stock in four years.

He indicated that it is possible Pirelli Tire North America could add Pirelli-brand truck tires to its mix under the new structure, but that would be a long-term decision.

Related story: ChemChina lays groundwork to control Pirelli