The 143 year old Italian tire manufacturer Pirelli looks set to be taken over ChemChina in a deal reportedly worth €7.1. ChemChina, also known as the China National Chemical Corp is a state owned corporation that deals in agrochemicals, rubber products, chemical materials and specialty chemicals, industrial equipment, and petrochemical processing.
According to Reuters, the deal was agreed to by Pirelli’s top shareholders last week. The offer will be launched at 15 euros per share, valuing the Italian group at 7.1 billion euros excluding net debt of almost 1 billion euros at the end of 2014. The ChemChina unit also envisages taking Pirelli private.
The takeover by ChemChina would give it access to a host of technology related to premium tires, and it would also give Pirelli a huge advantage in the Chinese market where the likes of Michelin and Continental are also looking at expansion.
The deal isn’t a done thing, however. As at the close of trade last Friday, Pirelli shares were trading at €15.50, only 50 cents away from the offer ceiling of €16. That would mean ChemChina would need to increase its bid for shareholders to agree to the takeover. There’s also the possibility that other tire rivals may make a bid as well.
Pirelli is probably one of the better known tire manufacturers, being the current tire supplier for Formula 1 and has great reputation among motorcycle riders looking for tires that can be used both on and off the track.