China National Chemical Corp (ChemChina) is to all set to buy into Pirelli PECI.MI, the world’s fifth-largest tyre maker. The 7.1 billion-euro ($7.86 billion) deal will see the transfer of majority shareholding of the 144-year-old Italian company into the hands of China National Chemical Corp.
As per the law, ChemChina unit China National Tire & Rubber will set up a joint venture to acquire a 26.2 percent stake from Italian holding firm Camfin and then make a mandatory takeover bid for the rest of Pirelli.
China National Chemical Corp (ChemChina) has already secured European Union antitrust approval for its bid for Italian tyre maker.
The Pirelli takeover is part of a series of takeovers made in Italy by cash-rich Chinese buyers, who are taking full advantage of a weak euro to acquire companies in Italy and other parts of Europe.
However, analysts believe that France’s Michelin and Germany’s Continental might counter bid the Chinese offer.
The offer will be launched at 15 euros per share, valuing the Italian group at 7.1 billion euros excluding net debt of almost 1 billion euros at the end of 2014. The ChemChina unit also envisages taking Pirelli private.
The deal will give state-owned ChemChina access to state-of-the-art technology to manufacture premium quality tyres, which can be sold at higher profit margins in the huge Chinese market.
The new Chinese management will also strengthen Pirelli’s to compete against rivals such as Michelin and Continental in the lucrative Asian markets.
