The deal, announced on Sunday, will see CNCC acquire the holding company Camfin, which owns 26 per cent of Pirelli, at €15 per share as a first step, before launching a full takeover of the group.
It will allow Pirelli to double its volumes in the industrial tyres market from 6m to 12m by giving the Italian group, which aims to keep its operational and technical base in Milan, access to the Chinese market.
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China’s largest chemical group with revenues of $40bn
China’s “merger king” is back, writes Tom Mitchell in Beijing. In swooping on Pirelli, China National Chemical Corporation’s chairman, Ren Jianxin, is returning to his roots as a frenetic dealmaker in both the private and state sectors.
Like many successful Chinese executives, Mr Ren left the security of a state-sector job in the 1980s to “jump into the sea” — a Chinese expression used to describe starting a business in the private sector.
Before borrowing Rmb10,000 to establish China National Bluestar, an industrial cleaning company, Mr Ren had a promising future in the country’s state-led chemicals industry. While at a research institute under the then chemicals ministry, he served as head of his work unit’s Communist Youth League Committee — a traditional feeder track for up-and-coming members the ruling Chinese Communist party.
CNCC and Mr Ren, 58, did not respond to requests for comment on Monday. The company’s chairman has previously told state media that he read Mao Zedong’s Little Red Book, a collection of the Chinese revolutionary leader’s quotes and speeches, a dozen times during his youth.
Unusually for entrepreneurs who abandoned China’s state sector in the early years of Deng Xiaoping’s “reform and opening” policy, Mr Ren returned to it. During the 1990s, Bluestar merged with more than 100 state companies.
The official China Daily once described Mr Ren as “the driving force in the Chinese chemical industry’s largest restructuring initiative” and also the country’s “undisputed king of mergers and acquisitions”.
The company that grew out of Bluestar’s merger spree and transported Mr Ren back into the state sector was CNCC, China’s largest chemical group and a Fortune Global 500 company with revenues of $40bn. Bluestar is now a CNCC subsidiary.
CNCC is one of about 120 large government-controlled groups administered by the State-owned Assets Supervision and Administration Commission. As such it is part of a longstanding government policy of “grabbing the large and releasing the small”, whereby Beijing retains control of key industrial sectors from chemicals and energy to telecommunications and transportation.
Beijing-based CNCC is a sprawling group with 140,000 employees and nine listed entities, all of which have floated shares on the Shanghai or Shenzhen stock exchanges. Its flagship tyre unit is China National Tire and Rubber, which in turn controls four tyre companies including Aeolus Tyre Company.
Mr Ren is no stranger to Europe, having also acquired French companies Adisseo and Rhodea in 2006 and Norway’s Elkem in 2011.
CNCC had previously expressed interest in acquiring Ohio-based Cooper Tire and Rubber, according to one banker familiar with the approach, but failed to conclude a deal.
Cooper Tire was subsequently at the centre of a bitter dispute between Apollo Tyres of India, which proposed paying $2.5bn for the US company, and Chengshan Group, Cooper’s former China joint venture partner. Chengshan’s opposition scuppered what would have been the biggest ever US acquisition by an Indian company.
