By the end of October, it is highly probable that China National Chemical Corp., ChemChina for short, will own a majority interest in Pirelli & Cie SpA. However, according to Pirelli CEO Marco Tronchetti Provera, Pirelli will continue to control its own destiny.
Provera has been busy giving interviews lately. It was the U.S. tire trade media’s turn on April 2. In a conference call, Provera emphasized what he wants and believes will happen.
1. Pirelli will become a larger player in the global truck tire market because ChemChina, through its National Tire & Rubber Co. subsidiary, has a strong global presence of its own with the Aeolus brand. (In a previous interview supplied by Pirelli Tire LLC, Tronchetti said Pirelli is the 15th or 16th largest truck tire manufacturer worldwide; after the deal, it will be the fourth or fifth largest.)
2. Pirelli will share consumer tire technology, but not plant space. When asked if any of the ChemChina passenger or light truck tire brands would be produced in Pirelli plants, Tronchetti emphatically said “No, not at all.”
3. Pirelli’s consumer tire business will continue to be managed and marketed by Pirelli. When asked specifically about the North American market, he said “No changes are coming.” However, he did say Pirelli truck tires may one day be sold in the U.S.
4. Pirelli will take advantage of synergies between the companies to greatly increase its share of the Chinese market, both in terms of consumer and commercial tires. Greatly increasing Pirelli’s share of the Asian truck tire market is of critical importance to Tronchetti.
Although not a priority of the merger, other acquisitions were not ruled out by Tronchetti.
As part of the agreement, ChemChina is purchasing the shares owned by Cam Finanziaria SpA, which owns 26.2% of Pirelli, for nearly $2 billion. If the remaining shareholders in the company sell their shares, the total cost to ChemChina will be close to $7.5 billion.
Tronchetti is a major shareholder in CamFin. The purchase also gives ChemChina the opportunity to purchase additional ordinary shares.
Tronchetti estimates the binding agreement will be completed by the end of July, with any additional stock offerings and purchases settled by the end of October. Under the terms of the agreement, Tronchetti will remain CEO for five years, with the right to name his successor.
On March 23, Tronchetti addressed Pirelli’s employees about what the agreement will mean to the company.
"The agreement with the Chinese will have no impact on employment. The opportunity with a partner like ChemChina is for the company to become bigger and to have a more effective penetration of the Asian market.
"Our factories and employment in general can only benefit, in future, from the entrance of a new shareholder," he said. “The Chinese partners appreciate our ability to produce tires of very high quality and our factories which are at the cutting edge worldwide. These are the points of strength in which we will continue to invest because they will allow us to maintain our leadership in the Prestige segment and to be among the leading producers in the Premium segment.
“The Chinese partner has no intention, as can be seen both in the agreements and in the clauses of the bylaws, to interfere in the operational management of the group. The headquarters and R&D will be kept in Italy. Technologies can’t be transferred to third parties. Changing these rules would require a vote of 90% of a Shareholders’ Meeting.
“All proposals about management, strategies and choice of managers remain the sole responsibility of Pirelli’s CEO and can only be rejected by the board in cases where it can be demonstrated that the proposals are not in the interests of Pirelli,” he added.
