Chinese state-owned company ChemChina is to buy Italian tyre maker Pirelli in a €7.1 billion (£5.1 billion) deal.
The move will give ChemChina access to technology to make premium tyres. According to Reuters, it could also help China, already a global player in sectors such as telecoms and internet, develop its automotive industry.
Meanwhile, Pirelli will gain greater access to the Chinese market, competing against larger rivals such as Michelin and Continental.
ChemChina's tyre making unit, China National Tire & Rubber, is to buy the 26.2 per cent stake in Pirelli owned by Italian investment firm Camfin. It will then launch an offer for the remaining shares at €15 per share, valuing the group at €7.1 billion.
Camfin said the bid would be launched by a consortium controlled by ChemChina but also part-owned by Camfin investors, who include Pirelli boss Marco Tronchetti Provera, Italian banks UniCredit and Intesa Sanpaolo, and Russia's Rosneft.
Pirelli headquarters remain in Milan
The company added that the partnership will double Pirelli's volume of industrial tires sold to about 12 million pieces a year.
Current Pirelli chief executive Tronchetti Provera will remain in his post. "We're pleased to have this opportunity working with Tronchetti and his team and continue to build together a world-class entity and a market leader in (the) global tire business," ChemChina said in a statement.
Pirelli’s headquarters will remain in Milan, as will the company’s research and development.
The acquisition is the latest in a series of Chinese investments in Italy, with recent acquisitions by People’s Bank of China including stakes in Fiat Chrysler Automobiles, oil giant Eni SpA, power grid firms Terna and Snam , turbine maker Ansaldo and luxury yacht maker Ferretti.
Pirelli shares were 2.56 per cent higher at €15.62 on Monday after the announcement.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.