Late last week the Italian government put in place new measures to limit the control exerted by Sinochem, a Chinese government-owned firm, over Pirelli.
Currently Sinochem is the largest single shareholder in Pirelli with a 37 per cent stake, with a further 9.0 per cent owned by China’s Silk Road Fund.
Other major investors include Camfin, the investment vehicle of CEO Marco Tronchetti Provera, with 14.1 per cent, and Italian brake maker Brembo (6.0 per cent).
In 2015 ChemChina — a company that later merged with Sinochem — took Pirelli private in a complex €7.1 billion ($11.4 billion) deal, which allowed Provera to stay in his role as CEO until 2026, and Camfin to retain its stake in the Milan-based firm.
Using the Italy’s “Golden Power” rules, which allows the government to protect companies, data and technologies of strategic importance to the country, Prime Minister Giorgia Meloni has put restrictions to curb Sinochem’s control over the tyre maker.
The Italian government said the move was spurred by Pirelli’s Cyber Tyre, which uses a microchip to collect vehicle data, and is “configured as a critical technology of national strategic importance”.
The new restrictions include limiting Sinochem to nominating a maximum of eight out of 15 members of Pirelli’s board, only allowing Camfin to select a CEO, and requiring any changes to the company’s corporate governance to be approved by the government.
Pirelli is due to elect a new board on July 31, and it is widely expected current deputy CEO Giorgio Bruno will replace Provera as the company’s boss.
The government is also requiring decisions related to “assets of strategic importance” to be made either by the CEO only or by 80 per cent of the board.
Pirelli is also prohibited from taking orders from the Chinese company, and it is not allowed to setup any organisational or functional links with Sinochem.
The developments at Pirelli come at a time of heightened tensions between China on one side, and Europe and the United States on the other. The two sides have sparred over the war in Ukraine, trade imbalances, and access to sensitive technology and data.
Italy was once seen as the EU country most comfortable with Chinese investment in its economy, as it signed up to China’s Belt and Road Initiative, and allowed companies, including power infrastructure firms, a luxury yacht maker, and turbine producer, to be taken over by Chinese firms.