Italy Thwarts Chinese Takeover of Tire Industry Powerhouse

27 Aug, 2023

Italy Thwarts Chinese Takeover of Tire Industry Powerhouse

Italy's government has taken decisive measures to safeguard the autonomy of Pirelli by obstructing Chinese control over the tire manufacturing behemoth. The 151-year-old Milan-based company, Pirelli, faces a critical situation due to its largest shareholder, Beijing-controlled Sinochem, owning a substantial 37% stake. This development unfolds against the backdrop of heightened tensions between Beijing and Western nations, notably underscored by the visit of the US Secretary of State to China.

Pirelli disclosed on Sunday that the Italian government's decision restricts the nomination of candidates for the position of chief executive to Camfin, a company overseen by Pirelli's CEO, Marco Tronchetti Provera. Additionally, the government has mandated that any modifications to the company's corporate governance must undergo official scrutiny. The initiation of these protective measures follows Sinochem's notification to the Italian government in March regarding its intentions to renew and revise an existing shareholder agreement.

The Italian Prime Minister, Giorgia Meloni's administration, employed the "Golden Power Procedure" regulations to evaluate this agreement. This procedure is aimed at safeguarding businesses that hold strategic significance for the nation. In 2015, Pirelli underwent a €7.1 billion acquisition by investors including ChemChina and Camfin. Subsequently, ChemChina merged with state-owned Sinochem, while the Chinese government's Silk Road investment fund acquired a 9% stake in Pirelli.

Amidst this development, US Secretary of State Antony Blinken embarked on a crucial visit to China, marking a rare high-ranking diplomatic engagement. Blinken's visit transpires amidst escalating conflicts between China and Western countries over concerns spanning trade, security, and Taiwan. Notably, expectations for substantial breakthroughs in the disputes between the two largest economies are minimal, encompassing the contentious issues of China's semiconductor industry development and global influence.