Don't worry, Igor. I know a way out of this.
Photograph by Andrey Rudakov — Bloomberg via Getty Images
By Geoffrey Smith
March 23, 2015

Marco Tronchetti Provera has pulled it off again, managing to keep control of tiremaker Pirelli SpA even as he brings in yet another foreign partner to prop up the company.

In a deal announced early Monday in Beijing, Chinese state-owned chemicals giant ChemChina, or CNCC, said it would buy Tronchetti Provera’s holding company Camfin, which is Pirelli’s biggest shareholder with a blocking stake of 26.19%.

Once that deal is completed, CNCC will make a full takeover bid for the company together with Camfin and “other investors”, including Italian banks Unicredit SpA and Intesa Sanpaolo SpA, as well as Russian oil company OAO Rosneft, Reuters reported.

The deal is typical of the challenges facing Italy’s proud blue-chips and the dynastic-minded tycoons who control them. It aims at allowing the company to gaining enough scale to keep it globally competitive while keeping the company’s patriarch in control.

CNCC will gain access to Pirelli’s intellectual property and roll it out in the faster growing Chinese and Asian markets–the statement says that it will be able to double sales volumes, although it doesn’t give a timeframe. At the same time, Tronchetti Provera, 67, avoids losing the degree of influence that would come if Pirelli had to merge with a listed rival like Goodyear Inc. (GT) or France’s Michelin (MGDDY). Jianxin Ran, CNCC said it’s “delighted with the opportunity to team up with Mr. Marco Tronchetti Provera and his team.”

A year earlier, Tronchetti Provera appeared to have solved the problem by selling half of Camfin to Rosneft, but that quickly became a political problem for him as both Rosneft and its chairman Igor Sechin (one of four Pirelli board members from the Russian company) found themselves on U.S. sanctions lists. Rosneft didn’t immediately respond to an e-mail asking whether Sechin would remain a director the company after the full takeover.

The deal values Pirelli at €15 a share, 20% more than Rosneft paid a year ago. And in early trading in Milan Monday, the shares rose well above that level, suggesting that the market thinks that either the full takeover bid, when it comes, will be higher, or that there may be a counter-offer from someone else.

The deal is also interesting because, in valuing Pirelli at €7 billion ($7.3 billion), it’s one of the biggest foreign deals in recent years by a company backed by the Chinese state (although it’s entirely consistent with the way Chinese state institutions have snapped up smaller portfolio shares in other blue-chip Italian companies recently).

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