Italy approves restriction of Sinochem’s rights to interfere in Pirelli affairs

The Italian authorities have limited the ability of Pirelli’s largest shareholder, the Chinese corporation Sinochem, to interfere in the company’s affairs. Now the most important decisions will have to be made with the approval of four-fifths of the shareholders, and the transfer of data from Pirelli to Sinochem will also be limited. This is due to the increasingly active interference of the Chinese company in the management of Pirelli and the growing concern of the management of the Italian company and the Italian authorities about this.

The Italian government approved measures, limiting the ability of its largest shareholder, the Chinese company Sinochem, to interfere in the affairs of tire manufacturer Pirelli. Italian authorities say the measures were taken in accordance with the rules in force in the country, allowing to check the actions of foreign shareholders in case of a potential threat to national security. Back in 2019, the Italian authorities expanded the list of areas that could be considered important for national security.

Previously reportedthat the strengthening of China’s position in Pirelli caused extreme dissatisfaction with the Italian government and personally Prime Minister of Georgia Meloni. Chinese China National Tire & Rubber Co. Ltd (a subsidiary of ChemChina, which was renamed Sinochem after a merger with another corporation in 2021) bought controlling stake in Pirelli in 2015.

Sinochem now owns a 37% stake in the Italian company. Since then, China’s relations with Western countries have changed, as has the policy of the Chinese shareholder in Pirelli.

Businessman Marco Tronchetti Provera, who owned the company at the time of the deal and still maintains a stake in it, then actively promoted this deal. Now, according to the Financial Times, he said that “the Chinese are dangerous, and Pirelli is in danger,” and called on the Italian authorities to intervene in the situation.

Recently, Sinochem has become increasingly involved in the affairs of Pirelli. For example, last year the Chinese company sent a letter to Pirelli, advising Beijing to be informed in advance of any meeting of the company’s leaders with foreign government and diplomatic officials, including those who have already retired and Italians. In March, the Chinese company announced a revision to the terms of the shareholder agreement, which, among other things, provides that Sinochem will have the right to appoint nine board members instead of eight, and the structure of Mr. Tronchetti Provera will have only three instead of the current four.

The situation has also become aggravated in connection with the upcoming change of the general director – Mr. Tronchetti Provera, who headed the company for many years, leaves his post in July. The new head of the company should be his deputy Giorgio Bruno.

It was Sinochem who appointed him, although it was previously assumed that the incumbent CEO has the right to choose his successor himself.

It was under these conditions that the Italian authorities decided to intervene in the situation. They state that their goal is “to create a network of measures to protect and manage Pirelli’s independence.” Among these measures is the requirement that “strategic” decisions concerning the company be made only if at least four-fifths of the board of directors speak in favor of them. This means that eight votes from Sinochem will not be enough to make critical decisions.

Another measure is limiting the transfer of information from Pirelli to Sinochem in order to “protect the company’s strategic information and innovation.” The Italian government explains these measures by the fact that Pirelli’s technology, which allows tracking the geolocation of a car and collecting data about it using a microchip embedded in tires, is critical from the point of view of national security.

Yana Rozhdestvenskaya