Pirelli, the renowned Italian tire manufacturer, is on the verge of a significant shift in its ownership structure as it prepares to end the controlling influence of its main Chinese investor, Sinochem. Sinochem, a state-owned enterprise, currently holds a 37% stake in Pirelli, making it the company’s largest shareholder. However, mounting pressure from Italian regulators and ongoing governance disputes have led Pirelli’s board to consider approving an agreement that would formally strip Sinochem of its controlling power, despite the Chinese group retaining its sizable stake. This move is part of a broader strategy to distance the company from Chinese control and align with Western regulatory expectations.
The relationship between Pirelli’s Italian and Chinese shareholders has been fraught with tension, particularly over governance and strategic direction. Sinochem’s influence has been seen as a major obstacle to Pirelli’s ambitions in the United States, a market that accounts for roughly 25% of the company’s revenue. Recent U.S. regulations targeting Chinese technology in the automotive sector have exacerbated these challenges, as Pirelli’s advanced tires-some equipped with data-collecting technology-risk running afoul of new compliance rules if the company is deemed to be under Chinese control. These regulatory headwinds have already forced Pirelli to suspend planned investments in the U.S., further highlighting the operational risks tied to its ownership structure.
To address these issues, the Italian government invoked its “Golden Power” regulations in 2023, limiting Sinochem’s authority and ensuring key management roles remained under local control. Despite these measures, disputes between shareholders have persisted, delaying the approval of financial results and prompting a broader internal review of governance. The anticipated agreement, which would see Sinochem relinquish its controlling role while maintaining its investment, is expected to resolve some of these tensions and pave the way for Pirelli to pursue its strategic goals without the shadow of Chinese regulatory risk. This development underscores the complex interplay between global investment, national security concerns, and corporate governance in today’s interconnected economy.
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(Source: Ainvest | Reuters | Bloomberg | Decode39)
