ChemChina to expand Pirelli business in Asia

Milan, Italy – Further details have emerged about the deal to buy Italian tire-maker Pirelli by the state-owned China National Chemical Corp. (ChemChina), suggesting that the firm is targeting expansion opportunities in Asia and in the industrial tires sector.

On 22 March, ChemChina’s subsidiary China National Tire and Rubber Co. (CNRC) signed an agreement with holding company Camfin SpA to acquire a share of Pirelli with Camfin reinvesting, simultaneously, a portion of the sale proceeds to repurchase up to 49.9 percent of its share capital.

In a news release on 22 March, Camfin said that that the partnership strengthened the group’s presence in a “strategic geographic area characterised by strong growth as well as giving birth to a global leader in the industrial tire segment.”

Pirelli’s industrial tire business – including truck, farm and OTR – will be reorganised, according to the statement. This will involve integration with “certain strategic assets” of CNRC and with the Fengshen Tires Stock Ltd Company (Aeolus).

“The integration is expected to deliver a doubling of volumes in the industrial tire business, from approximately 6 million pieces to approximately 12 million [a year],” added the statement.

The operation also envisages “an expansion of Pirelli’s business in Asia” and “potential” de-listing of the company.

The two parties have also agreed that the “current ongoing success and growth” of Pirelli is due to the role of its management and agreed that the same business culture would continue in the company.

“Central to the agreement is the continuity and autonomy of the Pirelli group’s present managerial structure,” it said, adding that CNRC envisioned reinstating Pirelli CEO Marco Tronchetti Provera who described the partnership as a “great opportunity” for Pirelli.

“CNRC’s approach to business and strategic vision guarantee Pirelli’s development and stability,” he said.

Pirelli R&D centre and its HQ in Milan will continue to be located in Italy and any HQ “delocalisaion” or transfer of technology to third parties would need the agreement of a “supermajority” equal to 90 percent of the share in capital.

CEO Tronchetti has also been quoted, by news reports, as saying that the acquisition would not have an impact on the employees of the Italian company.

Pirelli is the world’s fifth largest tire manufacturer and operates a sales network covering more than 160 countries and regions.

ChemChina is a China state-owned enterprise with annual sales of $39.4 billion in 2013 and is considered China’s largest chemical company and 19th among the world’s top 100 chemical corporations.

See also: ChemChina lines up €7.1bn takeover of Pirelli