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 The deal agreed with Pirelli shareholders on Sunday is the latest in
a string of takeovers in Italy by cash-rich Chinese buyers, who can
take advantage of a weak euro just as signs emerge that Europe is
coming out of economic stagnation.
It will give state-owned ChemChina, led by acquisitive chairman Ren
Jianxin, access to technology to make premium tires, which can be
sold at higher margins, and give the Italian firm a boost in the
huge Chinese market.
The bid for Pirelli marks a return of China's state-owned
enterprises (SOEs) to global dealmaking following a hiatus prompted
by President Xi Jinping's anti-graft crackdown that targeted several
current and former senior SOE officials.
It would be China's fifth-biggest outbound deal by an SOE, according
to Thomson Reuters data, and the first major acquisition since
China's MMG Ltd <1208.HK> led a consortium last year to buy the huge
Las Bambas copper mine in Peru from Glencore <GLEN.L>.
ChemChina's tire making unit China National Tire & Rubber will first
buy the 26.2 percent that Italian holding firm Camfin owns in
Pirelli, and will then launch a mandatory takeover bid for the rest.
The bid will be launched by a vehicle controlled by the Chinese
state-owned group and part-owned by Camfin investors, who include
Pirelli boss Marco Tronchetti Provera, Italian banks UniCredit <CRDI.MI>
and Intesa Sanpaolo <ISP.MI>, and Russia's Rosneft <ROSN.MM>, Camfin
said in a statement.
The offer will be launched at 15 euros per share, valuing the 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.
As details of the deal were leaked on Friday, shares in Milan-listed
Pirelli, which started business 143 years ago producing rubber
items, rose to a 25-year high and closed at 15.23 euros - a sign
that traders predict an improved offer or a rival bid.
Sources close to the matter said on Friday the deal with the Chinese
group will mean Rosneft, which is facing international sanctions due
to the Ukraine crisis and needs to cut debt, reduces its stake in
Pirelli.
MORE BANDWIDTH
The agreement would give Beijing-based ChemChina access to
technology used in making lucrative premium tires and could help
China, already a global player in sectors such as telecoms and
internet, develop its automotive industry.
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In turn Pirelli, whose tires equip cars in Formula One motor racing,
would have more bandwidth to compete against larger rivals such as
Michelin and Continental which are looking for growth in Asia.
Camfin said on Sunday Pirelli's less profitable truck and industrial
tire business would be folded into ChemChina's listed unit AEOLUS,
allowing it to double its output.
The new Chinese owners will pick a new chairman while Tronchetti
Provera, who started working in the tire maker in 1986 after
marrying a member of the Italian family that founded the firm, will
remain chief executive.
"We're pleased to have this opportunity working with Tronchetti and
his team and continue to build together a world-class entity and a
market leader in (the) global tire business," Ren said in a
statement.
Previous Chinese acquisitions in Italy, the euro zone's
third-largest economy, include stakes in power grid firms Terna and
Snam, turbine maker Ansaldo and luxury yacht maker Ferretti.
Excluding the financial sector, Italy is the second-biggest
acquisition market for China in Europe and fifth-largest worldwide,
with 10 deals completed since the start of 2014, according to
Thomson Reuters data.
Rothschild and ChemChina Finance Corp advised ChemChina. J.P. Morgan
advised China National Tire & Rubber, while Lazard was the financial
adviser to Camfin.
($1 = 0.9221 euros)
(Additional reporting by Denny Thomas in HONG KONG and Chen Aizu in
BEIJING; Writing by Danilo Masoni and Silvia Aloisi; Editing by
Susan Thomas and Ian Geoghegan)
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