CHINESE CHEMICAL GIANT BUYS MAJOR SHARES IN PIRELLI TYRES
April 2 2015.


The buyout of tyre producer Pirelli by ChemChina ignited feelings of resentment and resignation in Italy in March as the economically-struggling country prepared to give up what is widely considered to be an iconic part of its industrial tradition. While the Chinese auto and motorcycle industries will consider this another step in their quality evolution the reactions from Italy are far from universally positive. Pirelli is a flagship company for the Italian economic capital, where it began business in 1872 by making bicycle wheels before moving into the auto industry.

Pirelli's largest stockholder Camfin signed a deal with ChemChina under which the nationalised chemical giant will buy into the world's fifth-biggest tyre manufacturer in a 7.4 billion-euro ($8.07 billion) contract. It calls for ChemChina to eventually hold a controlling stake of at least 50.1 percent of the company famous for its risqué calendars. Due to the projected terms, the company's headquarters and research centre would remain in Italy with current CEO Marco Tronchetti still at the helm. Pirelli would eventually be divided into two companies, one dedicated to high-end tyres, the other to industrial ones.

Tronchetti informed staff in an internal note on Monday that the takeover was "a growth process which will take time, but in which I strongly believe and will engage in as both manager and shareholder. He added that ChemChina's bid "will allow us to take our growth strategy further with greater vigour," although his confidence failed to rally Italy's main business leaders, most of who appeared to accept that the Eurozone’s fourth largest economy, gasping for investment after the economic crisis, had few other options.

Former Italian premier Romani Prodi said: “Yesterday, one of the rare big Italian businesses changed owner. Today, industrial policy is made in Beijing, but we're happy because before this even the Chinese didn't come to invest in the country," he said, calling on Italy to recover its own "strategic industrial policy."

Although Prime Minister Matteo Renzi did not remark on the ChemChina deal, Labour Minister Giuliano Poletti commended Pirelli for being open to change and attracting much-needed foreign funds. "If there are Italian investors, great, but if there aren't, rather than businesses which slowly, for lack of investment, end up ageing and closing up shop, we need to retain vitality and do so by having an idea, It seems Pirelli has done so, keeping its head in this country with a strong national presence. Our country needs international investments."

But Gian Maria Gros Pietro, chairman of the management board of Intesa Sanpaolo bank (an indirect shareholder in Pirelli) was less impressed but ultimately resigned to the fact stating that the deal was "not ideal, but where in Italy will we find someone to challenge this takeover?"

Cesare Romiti, former executive of companies including Fiat and Alitalia, said he was "sure there will be benefits" but spoke of "great bitterness" at the takeover, warning that "taking entire industries away is dangerous for Italy. Italy is losing another company due to a lack of government policy which must aim to keep businesses here,"

La Repubblica daily also pondered if things "could have been done differently?" commenting that “the deal is the result of globalisation and the impossibility for a family to retain control over a group worth over 7.0 billion euros, in spite of the support of the country's main banks".

Zo Fu, the PR manager for Ducati China (who uses Pirelli tyres) remarks: “With Pirelli for all intents and purpose becoming a Chinese company we will see many benefits for the Chinese motorcycle industry. As the quality standards of the Chinese motorcycle industry are rapidly improving this will give Pirelli a great opportunity to supply tyres to the new wave of Chinese 2-wheelers. This will also stabilise the company and allow it to evolve and become bigger than it already is; Pirelli is currently the 5th biggest tyre manufacturer in the world, with the backing of ChemChina (and ultimately the Chinese government) it would be no surprise to see Pirelli break in to the top 3 within a few years”