March 25, 2015 / 1:23 PM / 2 years ago

Pirelli does not plan special dividend for ChemChina deal - sources

Pirelli tyres are seen in the paddock ahead of the weekend's Italian F1 Grand Prix in Monza in this September 4, 2014 file photo.REUTERS/Max Rossi

MILAN (Reuters) - Italian tyre maker Pirelli PECI.MI, which is being bought by China National Chemical Corp (ChemChina), does not plan to pay a special dividend to its shareholders as part of the buyout plan, two sources with direct knowledge of the matter said.

ChemChina is to buy into the world’s fifth-largest tyre maker in a 7.3 billion-euro ($8 billion) deal, agreed with Pirelli’s biggest shareholders on Sunday, that will put the 143-year-old Italian firm in Chinese hands.

Analysts have said a special dividend could have acted as a “sweetener” to convince shareholders to tender in their shares when ChemChina and Pirelli’s top investors launch a mandatory takeover bid on the company with a view to de-listing it.

The buyout bid price has been set at 15 euros per share, but Pirelli’s stock is already trading at around 15.5 euros - prompting some speculation ChemChina may have to raise its bid. There have also been media reports of a possible counterbid.

Pirelli will pay a routine dividend on its 2014 results before the buyout offer is launched, and analysts estimate it will be between 0.36-0.44 euros.

The sources said there was no intention to pay anything on top of that dividend, whose level will be decided by Pirelli’s board on March 31. Analysts had speculated an extraordinary dividend could be as high as 1.5 euros per share.

Pirelli declined to comment.

The buyout bid will be launched by a new holding company controlled by the Chinese state-owned group and part-owned by Pirelli’s core investors, which include its boss Marco Tronchetti Provera, Italian banks UniCredit (CRDI.MI) and Intesa Sanpaolo (ISP.MI), as well as Russia’s Rosneft (ROSN.MM).

The sources said that Rosneft, which bought into Pirelli last year and currently holds 13 percent of the company, will cash in 900 million euros.

The Russian oil major will then reinvest 400 million euros in the new holding being created by ChemChina and Pirelli’s shareholders, cutting its Pirelli stake to 5 percent, the sources added.

The final Pirelli stakes held by each investor will depend on the outcome of the buyout offer. Rosneft’s could potentially rise to as much as 18 percent.

Rosneft declined to comment.

Milan-listed shares in Pirelli, which are up nearly 40 percent so far this year, were flat at 15.46 euros at 1426 GMT.

($1 = 0.9118 euros)

Additional reporting by Denis Pinchuk in Moscow; Writing by Silvia Aloisi and Agnieszka Flak; Editing by Pravin Char

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