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Chinese Joint Venture Makes First Move to Buy Pirelli

Motor Trend logo Motor Trend 3/24/2015 Kelly Pleskot
Chinese Joint Venture Makes First Move to Buy Pirelli

One of the most famous tire companies in the world is about to undergo some major changes, according to new reports. ChemChina, an enterprise owned by the Chinese government, is taking the first steps to purchase Italian tire company Lamborghini Aventador Celebrates History with Pirelli" target="_blank">Pirelli.

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ChemChina's tire making division, China National Tire & Rubber, will enter into a joint venture to purchase the 26.2 percent of Pirelli that is currently owned by Italian holding firm Camfin. Then, the venture will begin a takeover bid for the remainder of Pirelli. According to Reuters, the deal is expected to be worth $7.7 billion.

Under the agreement, ChemChina will have access to Pirelli's technology to make premium tires and sell them at higher margins. Meanwhile, the Italian firm will also gain a strong foothold in China, the world's largest auto market.

But how will the takeover affect operations at the 143-year-old tire company? According to Reuters, the Italian management will stay with the company, and Pirelli's current shareholders will maintain half of the seats on the board of directors. While ChemChina will appoint a new chairman, Italian investors will have plenty of veto power. As an example, the support of 90 percent of the capital will be needed to move Pirelli's headquarters outside of Italy or transfer intellectual property to other companies. Despite the equal-sharing that seems to be in place for now, many experts don't think it will last. MotorTrend Image© Provided by MotorTrend MotorTrend Image

"I think we are going to see a clear power shift over the years. Ultimately, the Chinese will be in charge," an unnamed banker told Reuters about the Mercedes Denies Aston Martin Takeover Rumors" target="_blank">takeover.

ChemChina reportedly plans on making Pirelli a private company, which could further complicate the situation. The takeover bid will be led by a group comprised of ChemChina and Camfin investors, including current Pirelli boss Marco Tronchetti Provera.

Source: Reuters 1, 2

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