BY Fraser Tennant
China National Chemical Corp (ChemChina) has announced a $7.7bn deal that will see the state-owned company acquire Pirelli, the world's fifth-largest tire maker.
If the proposed deal for the 143-year-old Italian company is successful, it would be the largest overseas deal seen in China for two years, and another major addition to a growing list of high-profile acquisitions which currently include Volvo cars, Club Med and Sunseeker yachts.
A complicated deal, the acquisition would involve ChemChina paying approximately $1.96bn for a 26 percent stake in Pirelli (owned by Camfin, the holding company indirectly controlled by Pirelli chairman and chief executive Marco Tronchetti Provera) and then launching a bid to buy the rest of the tire maker’s stock.
“Pirelli’s excellent technology and management, and its well-known brand and sales channel, are what we hold high expectations on,” said Ren Jianxin, chairman of China National Chemical Corp. “The strength of Pirelli will add value to our tire business.”
Mr Ren, often referred to as China’s ‘merger king’, is keen to uphold what he sees as the Italian tire maker’s autonomy and reputation for quality. “We will not try to change Pirelli. Pirelli is Pirelli,” he said. “They are of two different tastes, and they’re not the same.”
To help facilitate this, Mr Ren has pledged to keep Mr Provera at the helm of Pirelli for at least the next five years.
Pirelli declined to comment on the deal other than to say that no other companies are bidding for the firm.
On this point Mr Ren warned that any counterbid for Pirelli would “hurt the Italian firm's investors and long-term strategy". He went on to say that his company was “worried that due to cheap liquidity there might be blind competition" but confirmed that no higher offer would be forthcoming as ChemChina had reached the limits of its budget.
And when asked if the acquisition meant that redundancies are likely at Pirelli, Mr Ren responded curtly by saying the deal was about “expanding scale and increasing market share". He also pointed out that despite ChemChina employing 120,000 people across all its operations, the company needed “more people to join” and there are plans in place to invite Pirelli's union members to visit China.