Pirelli brand and technology core to ChemChina takeover
Proposed €7.1b deal will give the state-backed mainland firm access to Italian tyre maker's technology, production capacity and sales network
China National Chemical Corp's (ChemChina) proposed €7.1 billion (HK$59.7 billion) takeover offer for Italy's Pirelli, the world's fifth-largest tyre maker, marks another huge acquisition by a state-backed mainland firm that will give it instant control over a famous international brand and the technology to upgrade its products.
Although the euro's sharp depreciation has helped the bid by China National Tire & Rubber, a unit of ChemChina, an acquisition adviser not involved in the deal said it was only a secondary factor compared with strategic considerations by the mainland company.
"A weaker currency helps since it means a lower cost of purchase and a higher rate of return, but it would not necessarily have been the determining factor," Jason Sung, a Hong Kong-based corporate finance lawyer at Herbert Smith Freehills, told the South China Morning Post.
He said China National Tire, the country's largest maker of off-the-road tyres used in construction and mining trucks, would find a global player with proven technology tempting.
Watch: ChemChina closes in on Pirelli takeover
"A Chinese player who already knows the domestic market well and has an established sales channel would find Pirelli, its internationally recognised brand name, technology and production capacity very attractive," Sung said.