ChemChina to buy into Italian tire maker Pirelli in $7.7 billion deal
By Paola Arosio and Danilo Masoni
MILAN (Reuters) - China National Chemical Corp (ChemChina) is to buy into Pirelli PECI.MI, the world's fifth-largest tire maker, in a 7.1 billion-euro ($7.7 billion) deal that will put the 143-year-old Italian company in Chinese hands.
The deal, agreed with Pirelli's top shareholders on Sunday, is the latest in a series of takeovers in Italy by cash-rich Chinese buyers taking advantage of a weak euro just as Europe is slowly emerging from economic stagnation.
The offer will be launched at 15 euros per share, valuing the Italian company at 7.1 billion euros excluding net debt of almost 1 billion euros at the end of 2014. ChemChina's tire making division envisages taking Pirelli private.
Shares in Pirelli, which hit a 25-year high last week, rose 5 percent above the offer price on Monday on expectations of a dividend payout before the deal is closed.
If successful, the deal will create a global leader with a market share of 10 percent, according to Swiss bank UBS.
It also represents the sale of another of Italy's industrial icons, after a string of deals in recent years in sectors from fashion to food to engineering to energy, as decades of stagnation have eroded the country's economic base.
"The sale of a prized piece of our industrial system like Pirelli to foreign buyers would not be a drama in itself if Italian capitalism were able to face up to international competition and the government had an industrial policy," the head of Italy's biggest union, Susanna Camusso said.
The deal 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. Continued...