July 12, 2024

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Italy thwarts the Chinese takeover of tyre company Pirelli

Italy has taken action to prevent a Chinese state-owned company from gaining control of the renowned tyre manufacturer Pirelli as part of its efforts to safeguard the company’s independence. Pirelli’s largest shareholder is Sinochem, a Beijing-controlled chemical giant that holds a 37% stake in the Milan-based firm, which has a history spanning 151 years. This move by Italy comes at a time when tensions between Beijing and Western countries are in the spotlight due to the visit of the US Secretary of State to China.

In a statement to investors on Sunday, Pirelli disclosed that the Italian government had made a ruling stating that only Camfin, a company controlled by Pirelli’s CEO Marco Tronchetti Provera, could nominate candidates for the position of chief executive. Additionally, any modifications to Pirelli’s corporate governance would require official scrutiny as per the government’s decision. This decision was prompted by Sinochem’s communication to the Italian government in March, notifying them of its plans to renew and update an existing shareholder agreement.

Under the “Golden Power Procedure” rules, which aim to protect strategically important businesses in Italy, the agreement was examined by the administration of Italian Prime Minister Giorgia Meloni. In 2015, Pirelli was sold to a consortium of investors, including ChemChina and Camfin, for €7.1 billion. Six years later, ChemChina merged with state-owned Sinochem, and the Chinese government’s Silk Road investment fund acquired a 9% stake in Pirelli.

US Secretary of State Antony Blinken’s visit to China coincides with these developments. However, strained relations between China and many Western nations, driven by trade disputes, concerns over Taiwan, and security issues, have led to low expectations for significant breakthroughs. One of the contentious issues between the two major economies is Washington’s efforts to impede the advancement of China’s computer chip industry.

Italy’s decision to block Chinese control over Pirelli reflects the current global landscape, characterised by geopolitical tensions and economic rivalries. It underscores Italy’s strategic interests in protecting nationally important businesses and preserving autonomy amid a rapidly changing world order.