China National Chemical Corp. to Buy Controlling Stake in Pirelli

By Eric Sylvers 

MILAN--China National Chemical Corp. agreed to buy a controlling stake in Italian tire manufacturer Pirelli & C. SpA as part of a deal that will see the two companies combine assets as they bulk up to confront bigger rivals.

A unit of China National Chemical, known as ChemChina, will initially pay about EUR1.8 billion to buy a 26% stake in Pirelli owned by Camfin, an investment vehicle indirectly controlled by Pirelli Chief Executive and Chairman Marco Tronchetti Provera. The Chinese company will then launch a bid to buy the rest of Pirelli's outstanding stock at EUR15 a share, slightly below Friday's closing price.

China National Tire & Rubber Co., the ChemChina unit making the acquisition, operates a range of businesses and is one of China's largest tire makers. Gaining control of Pirelli--which invested hundreds of millions of dollars in a large tire factory in Yanzhou, China--will allow the Chinese state-owned company to upgrade its technology and grow its market share at home. At the same time, ChemChina could get greater access to the European market while boosting global sales. Tire exports from China have been a source of friction in U.S.-China trade negotiations.

The partnership will strengthen Pirelli's presence in China and double the company's volume of industrial tires sold to about 12 million pieces a year, Camfin said in a statement. Pirelli's industrial tire business will be integrated with some assets of China National Tire & Rubber and Aeolus Tyre Co., a Shanghai-listed company partially owned by ChemChina.

The acquisition is the latest in a line of Chinese investments in Italy, with recent acquisitions by People's Bank of China including stakes of about 2% in some of Italy's biggest and most iconic companies, including Fiat Chrysler Automobiles SpA and oil giant Eni SpA. The Pirelli investment is the first time since the recent raft of acquisitions began that a Chinese company or entity seeks to gain control of the Italian company it is investing in.

Rick Carew contributed to this article

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