Pirelli to go Chinese

Iconic Italian tyre brand Pirelli appears set to go into the hands of the state-owned Chinese National Chemical Corp (ChemChina) in a $A9.86 billion takeover bid.

The Chinese company, in partnership with Cam Finanziiaria (CamFin), has offered $A20.84 a share for the 26.2 per cent of Pirelli currently owned CamFin (Pirelli’s largest investor).

The upshot of the biggest-ever purchase of an Italian business by a Chinese company is expected to be ChemChina owning a minimum 50.1 per cent of Pirelli shares, with the balance in the hands of CamFin.

However, a hiccup may arise from Pirelli’s share prices rising by 3.5 per cent to $A21.89 after the takeover bid became public, bringing suggestions ChemChina may have to lift its bid accordingly.

According to Automotive News Europe, market strategist Vincenzo Longo said: "Minority shareholders have a lot of power in their hands. The price offered isn't giving them the expected premium."

Meantime, investment specialist Banca Akros is reported to have said that "The success of the likely public offer at 15 euros ($A20.84) cannot be taken for granted."

The tender, if successful – and commentators seem to think it will be – will be followed by ChemChina making a public tender for the balance of Pirelli at the same price as the successful bid.

If the bid comes off, Pirelli will be given ingress into the massive Chinese market, giving it a leg up on its major rivals. The company’s less profitable truck and industrial tyre business is expected to be incorporated into China’s biggest tyre manufacturer AEOLUS, which is part of ChemChina.

Presently, Pirelli is the world’s fifth-largest tyre manufacturer behind Bridgestone, Michelin, Goodyear and Continental. Michelin and Continental are actively seeking growth in Asia.

The company will remain under the direction of the current chairman Marco Tronchetti Provera, who is also a part-owner of CamFin.