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Courtesy of Reuters
http://www.reuters.com/article/2015/03/23/pirelli-ma-chemchina-idUSL6N0WO0LA20150323

Deal values Pirelli at 7.1 bln euros, excluding debt
* Agreement is latest Chinese acquisition in Italy
* ChemChina-controlled firm to bid for Pirelli minorities
* Pirelli truck unit to be merged with ChemChina's AEOLUS (Adds govt, union, analyst comment, graphics link, updates shares)

true


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By Paola Arosio and Danilo Masoni



MILAN, March 23 (Reuters) - China National Chemical Corp (ChemChina) is to buy into Pirelli, the world's fifth-largest tyre maker, in a 7.1 billion-euro ($7.7 billion) deal that will put the 143-year-old Italian company in Chinese hands.
The deal, agreed with Pirelli's top shareholders on Sunday, is the latest in a series of takeovers in Italy by cash-rich Chinese buyers taking advantage of a weak euro just as Europe is slowly emerging from economic stagnation.
The offer will be launched at 15 euros per share, valuing the Italian company at 7.1 billion euros excluding net debt of almost 1 billion euros at the end of 2014. ChemChina's tyre making division envisages taking Pirelli private.
Shares in Pirelli, which hit a 25-year high last week, rose 5 percent above the offer price on Monday on expectations of a dividend payout before the deal is closed.
If successful, the deal will create a global leader with a market share of 10 percent, according to Swiss bank UBS.
It also represents the sale of another of Italy's industrial icons, after a string of deals in recent years in sectors from fashion to food to engineering to energy, as decades of stagnation have eroded the country's economic base.
"The sale of a prized piece of our industrial system like Pirelli to foreign buyers would not be a drama in itself if Italian capitalism were able to face up to international competition and the government had an industrial policy," the head of Italy's biggest union, Susanna Camusso said.
The deal will give state-owned ChemChina, led by acquisitive Chairman Ren Jianxin, access to technology to make premium tyres which can be sold at higher margins and give the Italian firm a boost in the huge Chinese market.

CHINA RETURN
The bid for Pirelli marks a return of China's state-owned enterprises to global dealmaking, following a hiatus caused by President Xi Jinping's anti-graft crackdown that targeted several current and former senior officials at state companies.
Italian Prime Minister Matteo Renzi has been uncharacteristically silent about the deal but his government has made no protectionist noises about ChemChina.
Under the deal, ChemChina's tyre making division, China National Tire & Rubber, will first enter into a joint venture which will buy the 26.2 percent stake Italian holding firm Camfin owns in Pirelli. The venture will then launch a mandatory takeover bid for the rest of Pirelli, the companies said in a statement.
The bid will be launched by a vehicle controlled by the Chinese state-owned group and part-owned by Camfin investors, who include Pirelli boss Marco Tronchetti Provera, Italian banks UniCredit and Intesa Sanpaolo, and Russia's Rosneft.
Rosneft bought a 50 percent stake in Camfin a year ago, before the onset of the Russian economic crisis. The oil company will remain a Pirelli investor after the buyout but it is unclear at this stage what its final stake will be.
The new Chinese owners will pick a chairman. Tronchetti Provera, who started working at the tyre maker in 1986 after marrying a member of the Italian family that founded Pirelli, will remain chief executive.

SWEETNER HOPES
Pirelli stock closed at 15.5 euros on Monday, a level which traders said prices in expectations of an ordinary dividend of 36 to 44 euro cents, which Pirelli has said it will pay before the buyout.
A fund manager who invests in Pirelli said while the deal made industrial sense there was scope for a sweetener that could be announced together with the ordinary dividend.
Giuseppe Puglisi, an analyst at Milan brokers Intermonte, said a special dividend of up to 1.5 euros "could placate the market" if it pushes for better terms. He said the offer did not fully reflect the long-term value of the company.
Because the deal has the backing of most of Pirelli's core investors, it is unlikely to fail or face a counterbid from a European rival such as France's Michelin or Germany's Continental, bankers said.
The agreement could help China develop its automotive industry further, while strengthening Pirelli's position against larger rivals such as Michelin and Continental which are looking for growth in Asia.
Camfin said on Sunday that Pirelli's less profitable truck and industrial tyre business would be folded into ChemChina's listed unit AEOLUS, allowing it to double its output.
While Pirelli's Italian management will stay on and the agreement gives Italian investors a veto on some decisions, there is little doubt who will call the shots, bankers said.
Pirelli sent a letter to assure workers the ownership changes would not impact jobs.
Previous Chinese acquisitions in Italy include stakes in power grid firms Terna and Snam, turbine maker Ansaldo and luxury yacht maker Ferretti.
Excluding the financial sector, Italy is the second-biggest acquisition market for China in Europe and fifth-largest worldwide, with 10 deals completed since the start of 2014, according to Thomson Reuters data.
Rothschild and ChemChina Finance Corp advised ChemChina. J.P. Morgan advised China National Tire & Rubber, while Lazard was the financial adviser to Camfin.

($1 = 0.9221 euros) (Additional reporting by Denny Thomas in Hong Kong, Chen Aizu in Beijing and Agnieszka Flak, Silvia Aloisi, Maria Pia Quaglia and Stefano Rebaudo in Milan; Writing by Danilo Masoni and Agnieszka Flak; Editing by Susan Thomas, Greg Mahlich and David Clarke)
 

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Haha.

Could be a good thing. Could be a bad thing. Good if the additional market increases their revenue which is rolled back into R&D and/or making prices more competitive. Bad if the product line is slowly replaced with inferior products, hoping to just ride the name.

Gut reaction is dismay at seeing a country's icon sold to another country that has a reputation for making junk. I do realize, a lot of quality things are built there as well, but, I like when things are produced by countries other than China.
 

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Discussion Starter #4 (Edited)
Haha.

Could be a good thing. Could be a bad thing. Good if the additional market increases their revenue which is rolled back into R&D and/or making prices more competitive. Bad if the product line is slowly replaced with inferior products, hoping to just ride the name.

Gut reaction is dismay at seeing a country's icon sold to another country that has a reputation for making junk. I do realize, a lot of quality things are built there as well, but, I like when things are produced by countries other than China.
We have a winner.

I agree somewhat, there are a lot of good products that get made in hina, but the stigma will never completely perish. Maybe rightfully so, even some brands I have trusted for a long time have witnessed a drop in quality compared to when their products were made back home.

In this particular case we are talking about life and death, so I have seen some comments on the internet that are extreme but maybe warranted. Some say they will never ever buy Pirelli again, others say meh, there won't be that much of a difference. The interesting one was from a vendor claiming that a regular customer of his went in for a routine tire change and felt that the same set of tires he has been used to running for years felt different, it felt worse, with no feedback whatsoever to the rider. Vendor uninstalled the tires and compared them to some recent batch and there was only one difference......Made in China as opposed to Made in Italy.
 

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The interesting one was from a vendor claiming that a regular customer of his went in for a routine tire change and felt that the same set of tires he has been used to running for years felt different, it felt worse, with no feedback whatsoever to the rider. Vendor uninstalled the tires and compared them to some recent batch and there was only one difference......Made in China as opposed to Made in Italy.
That's a scary thought!
 

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chemchina bought the major part of the shares of Pirelli not the whole company but since they have the 51% of the company they will controll it.
Pirelli also is already producing tyres in China my DRII was bought on 2012 and was already made in china and honestly i didn't liked them, the front at least never gave me a really good feedback.
 

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Dang it. I just bought a set of Pirelli Rosso Corsa. Too late to return now. Two weeks left until trackday. It tripped me out when I saw the rear tire was Made in Germany and the front said Made in China. There goes my confident.

Going back to Michelin after this set.
 

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I run Michelin. Pilot Road 4's to be exact.
 

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Its an estrategic move... China is buying most of the worlds raw materials...

They buy companies with large history in order to get their know how..

Raw materials + know how = blast!

This is just one more case of it, India is also doing similar moves.
 

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Are some of you really going to stop using Pirelli, because it's made in China? Can't work out if it's Italian loyalty or lack of trust.

I personally don't use Pirelli, but I find the sentiments amusing. Not all Italian products are that great either. Ever heard of the bogus brand called Ducati?

China is far more advanced than most European countries in terms of production processes, technical know-how and equipment, they just don't have iconic brands.

Of course, with 1.5 billion people or whatever it is there will be plenty of companies that make junk, but I don't see how made in China stamped on a genuine Pirelli tyre is a cause for concern
It's not like 5 unpaid, malnourished factory workers mold the rubber in their cupped hands. Get over it.
 

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Dang it. I just bought a set of Pirelli Rosso Corsa. Too late to return now. Two weeks left until trackday. It tripped me out when I saw the rear tire was Made in Germany and the front said Made in China. There goes my confident.

Going back to Michelin after this set.
i bought a set of Diablo Rosso Corsa and i am happy to see that they are made in Germany.
 

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Dang it. I just bought a set of Pirelli Rosso Corsa. Too late to return now. Two weeks left until trackday. It tripped me out when I saw the rear tire was Made in Germany and the front said Made in China. There goes my confident.

Going back to Michelin after this set.
Ahhhh fu.ck, you'll be fine.

Unless you really are a 'Moto GP Racer' i don't think people will notice a difference. I'm a firm believer in the placebo effect though.
 

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Rode on track with it...I survived. Real sticky but felt the tires are a bit soft. Pirellis are known to have predictable lean angle while Michelin just sucks you into the turns. I'll try the Michelin Supersport next.
 
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