ChemChina’s latest Pirelli shares held indirectly

Following the news that China National Tire & Rubber Co. (CNRC), a subsidiary of China National Chemical Corporation (ChemChina), entered into a binding agreement with Edizione with respect to the purchase of 1.574 per cent of the share capital of Pirelli on 13 April, company representatives have issued a clarification that these shares are held indirectly.

Despite numerous news and financial sources reporting this effectively means that ChemChina controls as much as 30 per cent of Pirelli, a spokesperson told Tyres & Accessories that “all Edizione shares (around 4.6 per cent of Pirelli) will be acquired by Bidco, the last of the holdings down the control chain (Newco – Holdco – Bidco – Pirelli) that will be indirectly controlled by CNRC (ChemChina), Camfin (Italian shareholders) and LTI (Rosneft). Their point is that is an over-simplification to say that ChemChina now holds more than 30 percent of Pirelli. Indeed, their view is that the new majority shareholders (ChemChina, Camfin and LTI) will hold more than 30 per cent of Pirelli together. However, because the precise percentages are obscured by the complex ownership chain, and seeing as Camfin’s sale of its shares in Pirelli to ChemChina precipitated the whole takeover narrative, this explanation is also a little too straightforward.

Interestingly, ChemChina’s statement adds that Edizione also has the right to terminate the share purchase agreement in the event of the launch of one or more competitive tender offers by third parties in respect of the Pirelli ordinary shares, unless Bidco announces an increase of the price of its offer to at least the same price as the last competitive offer. In short, this means that the 15 euros per share pricetag Edizione has agreed to sell its stake for could go up if another bidder came on the scene. So far there have been reports on the subject, but no further indication that there is likely to be a competitive tender. Indeed, both financial sources and Marco Tronchetti Provera himself have poured water on this idea.