Overnight it was announced that a consortium led by state-run ChemChina would launch a 7.1 billion euro ($9.8 billion) bid for Pirelli. Other members of the consortium, which will be majority owned by ChemChina, include Italian banks UniCredit and Intesa Sanpaolo, the Russian government owned oil company Rosneft, and current investors, such as Pirelli boss Marco Tronchetti Provera.
The first move in the takeover will see ChemChina purchase Cam Finanziaria's (Camfin) 26.2 percent stake in the tyre maker at 15 euros ($20.80) per share. Camfin is a holding company part owned by the current Pirelli CEO Marco Provera; Provera and much of the company's board members are expected to retain their current positions should the takeover be successful.
Next, the ChemChina-led consortium will seek to purchase the rest of Pirelli's outstanding shares at the same price, 15 euros each. Trading after news of the bid broke pushed Pirelli's stock price to 15.50 euros ($21.49) at the time of writing, making it likely that the consortium will need to raise its offer price.
According to Forbes, Pirelli is the fifth largest tyre maker in the world. Pirelli, like Continental from Germany, lives on the second tier in terms of volume, well behind leaders Bridgestone, Michelin, Goodyear and Sumitomo.
An injection of fresh capital could help Pirelli better compete with its larger competitors. Pirelli is currently the exclusive supplier of tyres for all Formula One Grand Prix teams.
Reuters and Automotive News report that the consortium will take Pirelli private, but that the company will keep its headquarters in Italy.