Tuesday, March 24, 2015

Pirelli, the contract to reduce the weight of China – Il Sole 24 Ore

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This article was published March 24, 2015 at 06:36.
The last change is the March 24, 2015 at 08:02.

A year and a half, after the takeover, to find a new partner for Pirelli and permanently lower the majority of ChemChina to 50.1%. This, in the folds of the complex close agreement with the Chinese, the final goal of the reorganization of the shareholder. A new member that today there is, because otherwise it would have been at the table, but that it will be neither a public body such as the Strategic Fund nor an Italian infrastructure fund F2i like, doing another job.

So, the timing to get to the point is marked by the terms of a series of contractual options. In the event that it is not possible to delist the Pirelli for accessions insufficient to promote the merger with the new company is not listed, the problem would not arise: ChemChina would have 50.1% and other shareholders a total of 49.9%, distributed as follows: 31.9% of Camfin Italian shareholders and 18% of the Russian Rosneft.

At the other extreme, if the takeover had great success with 100% of the capital of Bicocca, ChemChina would have 65% and the other 35% (22.4% Italians, 12.6% the Russians). The bid should be completed by the summer, presumably in September.

At this point the members of the consortium of Italian Marco Tronchetti Provera would have six months to aggregate a new member and, through a capital increase reserved, ChemChina dilute up to 50.1%, minimum quota reserved for the Chinese in any scenario (unless the next requotes Pirelli that would see them fall below 50%, to make room for the market, but always as a majority shareholder). In this case you would have the intake of fresh media by a new member to decrease the component to debt arising from the financing of the tender offer, a figure varies according to the adhesions that may exceed 3.3 billion equivalent made to equity OPA in the vehicle (2.2 billion by ChemChina, 1.1 billion from the Italian-Russian team).

If this first option was made expires without result, take over a six-month “truce”, expiration of which, from the beginning of 13-th month Opa Camfin would still right to designate up to three investors to detect by the Chinese the block of shares exceeding the threshold of 50.1% and then to 14.9%. In this case it would, however, members of a different nature than the previous scenario, namely “financial”, since the three new shareholders would have governance rights.

After another six months, even if it were not the arrival of new members, the ball would pass ChemChina that, then after 18 months Opa would have the right, but not the obligation, to call at will up to three investors of its choice to whom they will sell up to 14 , 9% of Pirelli, dropping to just 50.1%.

The garrison Italianness Pirelli is still entrusted to governance. Bulgarian majority of 90% of the capital to change the status in the parts that establish that the seat and intellectual property of Pirelli will remain in Italy (with the de facto veto in the hands of MTP Spa). It rules a bit ‘more complex to ensure the conduct of the business to the management team of Pirelli, but that, in essence, saying that as long as the block between Italy and Russia will have more than 20% will not be possible to change the governance. The division of seats in the board of directors includes only two cases, regardless of the shares: that of a Pirelli Pirelli delisted and that of a listed company. In the first case, eight directors including the chairman will be appointed by ChemChina and eight, including the CEO (Marco Tronchetti Provera) from the other shareholders, including 5 by the Italians and three Russians. In the second case, with Pirelli still on the Stock Exchange, the board would have to 15: eight appointed by the Chinese, including the CEO (always Tronchetti), four from the block and three Italian-Russian minorities market. In the case of delisting the president would have the deciding vote in case of a tie, but could not exercise it unless there is evidence that the resolution is not in the interests of Pirelli. A Tronchetti, which is contractually assured the leadership of the group for five years, it will have to appoint his successor, or failing that, to Camfin.

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