Pirelli shareholders have agreed to a deal for the China National Tire & Rubber Company, a division of the state-owned China National Chemical Corporation, to buy the Italian tire concern for 7.1 billion euros ($7.7 billion US). The deal would begin with ChemChina paying $1.9 billion for a 26-percent stake in Pirelli that is owned by CamFinanzaria, described as "an investment vehicle indirectly controlled by Pirelli Chief Executive and Chairman Marco Tronchetti Provera" but also including banks UniCredit, Intesa Sanpaolo, and Rosneft. ChemChina would then put out a tender to buy the remaining shares for 15 euros apiece, a little less than the 15.26-euro price where the stock last traded when the deal was announced.

If ChemChina can conclude the deal, it plans to take Pirelli private, then relist after four years. The acquisition would give the Chinese company a guidebook on premium tire technologies, and would give Pirelli in-house access to the Chinese market as well as the kind of pocketbook it needs to challenge Michelin, which has 2.5 times the market capitalization, and Continental, which has six times the market cap.

Pirelli's industrial business would be hived off to ChemChina's Aeolus industrial tire brand. Assuming the deal gets done, we wonder how it will affect Pirelli's involvement in Formula One. A new tender for F1's tire supply will be conducted later this year, and Pirelli motorsport boss Paul Hembery has already said the company can't commit to bidding until it knows what's happening with the regulations going forward. Now it might first need to figure out what's happening with its own objectives.

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