MILAN, Apr. 1 (Class Editori) - Alberto Bombassei and its Brembo, global leader in the brake systems industry, and the rich Chinese family of the entrepreneur Ishun Niu, active in the rubber, tires and transmission systems sector, have acquired important shareholdings in Pirelli, by strengthening the leadership of Marco Tronchetti Provera and the current relative majority of ChemChina. Pirelli, Brembo and Hixih Rubber Industry, the company founded by Niu, are holding good market positions in China and in the Asian market.
The operation started by the Chinese has taken place through a Luxembourg financial vehicle, Longmarch, which belongs to the group Hixih Rubber Industry; the latter was already Pirelli’s business partner, thanks to a joint venture established in China in 2005. Longmarch has signed with Camfin – owned by Tronchetti – a preliminary and not binding MoU, in order to evaluate a potential strategic partnership, aimed at developing private equity activities, including the healthcare sector.
In particular, the partnership, whose governance will be under the responsibility of Camfin, provides for the purchase of Pirelli equities, accounting for 5.19% of the capital, by Longmarch; the purchase will be granted by a repurchase agreement signed with ICBC, the Industrial Commercial bank of China, namely the biggest Chinese bank which is currently holding the underlying shareholding.
The industrial relations between Longmarch and Pirelli date back to 2005, when the first factory of the group was founded in China through the establishment of a joint venture which contributed to the development of Pirelli’s factories in the Shandong province. In order to allow the feasibility, contents, tools and modalities evaluation, as well as to grant the optimisation of every economic-financial aspect, Camfin and Longmarch have arranged a negotiation period of exclusivity, which will last 60 days, starting from today.
In this view, Camfin has also confirmed the solidity of the long-term partnership started in 2015 with ChemChina, and the long-term stability of the current governance structures, which have the aim of safeguarding the entrepreneurial culture of Pirelli.
Last Friday, the main shareholder of Bicocca, ChemChina, using Marco Polo International Italy as a vehicle, purchased on the market more than 1.2 million of Pirelli equities, accounting for 0.12% of the company’s capital. The new purchases have costed on average €3.3357 per share, which has led to an investment amounting at €4.002 million. The Pirelli’s shareholding held by ChemChina is currently amounting at about 46%.
Yesterday it was released that Brembo, global leader in the design, development and production of brake systems, is holding – both directly and through its parent company Nuova FourB – a share equal to 2.43% of Pirelli’s capital. By adopting a not speculative and long-term approach, Brembo has explained that it has autonomously decided to invest in Pirelli.
Currently, the market capitalisation of Pirelli amounts at €3.62 billion (2.2 billion is that of Brembo); in other words, the Nuova FourB has spent about €79 billion to buy the shareholding of Pirelli, a company which was listed on the stock exchange in September 2017 at the price of €6.50 per share. The current market prices (€3.625 updated to yesterday’s closing) are the lowest since the IPO.
“The incoming of new shareholders in the share capital of the company is representing a positive news and might trigger some speculations about M&A in the future”, as Fidentiis has stated. In addition, it has appreciated the Pirelli’s signature of a €800 billion new credit line expiring in five years “because the new financing will strengthen the group debt’s structure in the current and unfavourable macroeconomic context due to the Covid-19 epidemic”.
Pirelli is controlled by Marco Polo International Italy/ChemChina and Camfin; the two shareholders are bound by a co-investment agreement which was renewed on August 1, 2019. The new three-year agreement shall enter into force the day of the call of the annual assembly of the shareholders, in order to approve the results of the 2019 financial year. Shareholders should meet again on June 18 and for this reason the new agreement among the shareholders will enter into force around mid-May.
The financial analysts have evaluated that Pirelli and Brembo might also decide to merge, thanks to their similarities. Both companies are indeed focused on the production of car components and on a similar geographical coverage. Moreover, they are complementary in terms of sale channels (95% of Brembo’s sales come from OEM, while Pirelli records almost 80% of its revenues with after-market sales) and premium segment/market luxury.
In addition, Brembo has appointed a new CEO (Daniele Schillaci, 56) who can boast an extraordinary experience, while the CEO of Pirelli, Tronchetti Provera is 72 years old and sooner or later shall leave the company. In the theoretical possibility of a merger between the two companies, Banca Akros has evaluated that, at the current market prices, Marco Polo International may hold 26.8% of the new entity, Nuova Four B less than 23.4% and Camfin about 6%.
Meanwhile, yesterday Pirelli strengthened itself from a financial point of view, by subscribing with a team of main Italian and foreign banks a new credit line amounting at over €800 billion expiring in five years. The new bank line is entirely “sustainable”, by aiming at respecting the economic and environmental sustainability goals of the group.
“This new financing, which will be mainly used in order to refund the existing debt, allows the group to further increase the already significant coverage of its financial debt maturities at least until the next three years, at economic conditions slightly better compared to what has been provided for by the Industrial Plan”, as the company has specified.
During the last days, Pirelli has postponed the expiration date of a €200 million credit line by more than one year, namely to September 2021, compared to the original deadline scheduled in June 2020.
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