ADVERTORIAL — China National Chemical Corp (ChemChina) is to buy into Pirelli, the world's fifth-largest tire maker, in a 7.1 billion deal that will put one of the most prosperous Italian companies into Chinese hands.
Ren Jianxin, chairman of ChemChina, proposed the idea two years ago. ChemChina is a company with 140 000 employees, annual revenues of $36 billion and they are present in more than 140 countries. The Chinese entrepreneur went to meet Marco Tronchetti-Provera, Pirelli’s leader. Pirelli is a company backed by more than 100 years of experience, with 30 000 employees, 20 facilities and 6 million tires produced yearly.
Negotiations weren’t going well as many of Pirelli’s allies were against the idea of letting Pirelli, an Italian tire produce, fall into the hands of the Chinese. The Chinese were lucky to acquire the Italian company, they were able to profit from the decline of the Euro as Europe is recovering from an economic crash.
Even if the headquarters will continue to be independently managed from Italy, this transaction will let ChemChina have access to a high quality tire producer, which will eventually generate sizeable margins while helping China develop their own automotive industry. Pirelli, on the other hand, will now have exclusive access to the Chinese market, and will now be able to compete with Michelin and Continental, groups that are also looking to expand in Asia.
This transaction also guarantees development and stability, as well as potential to double Pirelli’s annual production from 6 to 12 million tires. The success of this operation, seemingly profitable for both enterprises, will help them reinforce their role as world leaders in the tire industry, also making this transaction one of the biggest of its kind between Italy and China.
The new Chinese owners will eventually choose a new president. Marco Tronchetti-Provera, who will remain as vice-president without any executive assignments in the new Pirelli, admits that he sees Italian condottieri in Ren Jianxin, meaning he is aggressive, has ingenuity, intuition, and the capacity to adapt, which will help Pirelli achieve its full potential. This transaction from Italian hands to Chinese hands seems profitable for both of these giants of the industry.
Source : Quattrotires.com