Italian tire manufacturer Pirelli may soon belong to the Chinese as the state-owned China National Chemical Corp (ChemChina) is poised to buy out the 143-year-old company. According to a report by Reuters, Pirelli’s top shareholders have already agreed to the deal, estimated to be worth €7.1 billion (US$7.7 billion). Reuters reports the number excludes Pirelli’s net debt, which the company’s preliminary 2014 fiscal report lists at €980 million.
ChemChina’s tire producing division, China National Tire & Rubber (CNRC), will acquire a 26.2% stake in Pirelli from Italian holding firm Camfin for €15 a share. CNRC will then launch a takeover bid for the remaining shares. ChemChina says it will maintain Pirelli’s current management team and operations while adopting a new business growth strategy.
“The partnership with a global player like ChemChina, through its affiliates, represents a great opportunity for Pirelli,” says Marco Tronchetti Provera, Pirelli chair and chief executive officer. “CNRC’s approach to business and strategic vision guarantee Pirelli’s development and stability.”
CNRC is China’s leading manufacturer of steel radial and off-road tires. The acquisition would give ChemChina access to Pirelli’s premium tire technology. The deal would also give Pirelli a foothold on the Asian market, giving it an edge against competitors Michelin and Continental.
“We are delighted with the opportunity to team up with Mr. Marco Tronchetti Provera and his team to continue to build together a world class organization and a market leader in the global tire industry,” says Jianxin Rin, ChemChina chair.
The transaction is still subject to regulatory approval by both Italian and Chinese authorities.
Pirelli’s preliminary 2014 fiscal report estimates net sales of €6.018 billion. Though the company claims a debt of approximately €980 million, that is a marked improvement from a debt of €2.0 billion reported after the first three quarters of 2014.