China’s Sinochem and Pirelli: A Potential Shift in Ownership
Table of Contents
China National Tire & Rubber Corporation (CNRC), a subsidiary of Sinochem holdings Corporation Ltd., is exploring options regarding its stake in Pirelli & C. S.p.A., potentially leading to a change in ownership of the iconic Italian tire manufacturer.
The Current Ownership Structure of Pirelli
Currently, CNRC holds approximately 37.3% of Pirelli’s ordinary shares through its holding company, Camfin S.p.A.. This makes CNRC the largest single shareholder in Pirelli. Other notable shareholders include institutional investors and the Pirelli family itself, through Pirelli Foundation.
Sinochem’s Exploration of Options
Sinochem is considering various options for its Pirelli stake, including a potential sale. This decision stems from a broader restructuring within Sinochem Holdings, following its merger with chemchina in 2021. The restructuring aims to streamline operations and focus on core businesses. According to a Reuters report on january 25, 2024, Sinochem has engaged investment bank Goldman Sachs to advise on the process.
Potential Buyers and Italian Government Concerns
Several potential buyers have been identified, including Bridgestone Corporation and Michelin.However, the Italian government, led by Prime minister Giorgia Meloni, has expressed concerns about a potential takeover by a competitor, fearing job losses and a loss of Italian technological expertise. Italy’s Ministry of Enterprise and Made in Italy (MIMIT) has the power to intervene in strategic acquisitions under the Golden Power law (Decreto Legge 30/2020), which protects companies deemed of national strategic importance. The law allows the government to block or impose conditions on foreign investments.
The Golden Power Law and National Security
The Golden power law, originally introduced in 2012 and substantially strengthened in 2020, grants the Italian government special powers to scrutinize and potentially block foreign investments in sectors considered critical to national security and public interest. These sectors include defense, energy, communications, and, increasingly, technology. The Italian Senate’s legislative record on Decree Law 30/2020 details the expanded scope of the law. The government’s concerns regarding Pirelli center on the company’s advanced tire technology, which has applications in both civilian and military sectors.
Timeline of Key Events
- 2015: CNRC acquires a 26.2% stake in Pirelli.
- 2017: CNRC increases its stake to 37.3% through Camfin.
- 2021: Sinochem and ChemChina merge, prompting a review of Sinochem’s portfolio.
- January 25, 2024: Reuters reports Sinochem is exploring options for its Pirelli stake.
Potential Outcomes and Future Implications
The future of Pirelli remains uncertain. Possible outcomes include a full sale to a competitor, a partial sale to new investors, or Sinochem retaining its stake while implementing changes to address Italian government concerns. The situation is being closely monitored by the Commissione Nazionale per le Società e la Borsa (CONSOB), Italy’s securities regulator, to ensure transparency and protect the interests of all shareholders. Any significant transaction will require approval from both Italian and Chinese regulatory authorities.
