Pirelli’s Chinese owner weighs sale of stake in tyremaker

Sinochem is considering selling its 37 per cent stake in Italian tyremaker Pirelli as the Chinese state-owned conglomerate seeks to streamline its global portfolio of assets, according to sources.

The Beijing-based oil-to-chemicals group is in the early stages of reviewing its holding in Pirelli, the sources said.

Prospective buyers including private equity firms have shown preliminary interest in the iconic Milan-based firm. Sinochem may also sell a partial stake or divest over time on the market.

Chinese state-owned enterprises including Sinochem are under government instructions to review their assets and ditch those outside their core businesses. The drive could see companies unwind years worth of big-ticket overseas acquisitions like Pirelli, bought for about $8 billion (€7.5 billion) in 2015.

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Pirelli shares fell as much as 4.3 per cent in Milan trading.

Relatively high financing costs for buyers in recent months, as well as Pirelli’s debt load, would be hurdles to any potential deal. The firm had a negative net financial position of €3.4 billion as of September 30, according to its interim report.

Any change of control of Pirelli could trigger a mandatory takeover bid for the company, which is listed in Milan. The tyremaker’s shares have fallen about 20 per cent in the past 12 months, giving the company a market value of about €4.8 billion.

Previous considerations didn’t lead to a sale and Sinochem could decide to retain Pirelli for longer, the sources said.

A representative for Sinochem’s press office said they are not aware of news that the company will sell its stake in Pirelli, and referred to the Italian firm’s exchange filings for any related information.

Sinochem was formed after the merger of Sinochem Group and China National Chemical almost two years ago. Its businesses span agrochemicals and animal nutrition as well as petrochemicals and machinery, environmental science and finance, according to its website. In addition to Pirelli, its rubber and tyre assets also include Shanghai-listed Aeolus.

Led by chief executive Marco Tronchetti Provera, Pirelli makes tyres for high-end automotive brands including Ferrari, McLaren and Bentley. Provera is its second largest shareholder with 14.1 per cent, while Chinese state-backed investor Silk Road Fund controls 9 per cent, its 2021 annual report shows.

Li Fanrong, Sinochem’s chairman, also chairs the board of Pirelli. Provera’s Camfin investment vehicle has a shareholder pact with Sinochem and other Pirelli investors that among other things sets the governance of the company.

Pirelli is scheduled to report full-year results for 2022 on February 22. - Bloomberg