Pirelli, Tronchetti’s chinoiserie and Meloni’s lighthouses
The Meloni government plans to limit Sinochem's influence in Pirelli, but risks the wrath of China. Tronchetti's manoeuvres, contradictory indiscretions, Brembo's role and the Palazzo Chigi dossier
Giorgia Meloni's government is looking for a way to reduce the influence of Sinochem , the Chinese state-owned petrochemical and fertilizer conglomerate, over Pirelli, of which it is the largest shareholder with 37 percent. Bloomberg writes it, based on information received from anonymous sources, framing the Pirelli affair within the more general tensions between the West and China.
Pirelli manufactures tires (including high performance ones) for cars, and supplies Formula 1 cars.
THE OPTIONS TO LIMIT SINOCHEM
More specifically, the government is considering restricting the sharing of information on Pirelli's strategic technologies with members of the board of directors appointed by Sinochem, and limiting the latter's right to vote.
A decision has not yet been made by Palazzo Chigi. The executive, however, has no intention of changing the shareholding structure of Pirelli or of forcing Sinochem to sell his stake.
THE RENEWAL OF THE MEMORANDUM ON THE BELT AND ROAD INITIATIVE
In the background, there is the political and technological competition (mainly concerning semiconductors ) between the United States and China and the deterioration of relations between the two powers. Bloomberg writes that, in general, European countries – given the alliance relations – support Washington's actions to contain Beijing's rise, but would still prefer not to be forced to cut commercial ties with an important partner.
In all of this, Italy finds itself in a particularly delicate position: it is in fact the only G7 country to have signed (in 2019) a memorandum of understanding with China on the Belt and Road Initiative, the infrastructure mega-project geopolitical promoted by Chinese President Xi Jinping, also known as the New Silk Road. The agreement had no major practical consequences, but it has great symbolic value. The pact will be renewed automatically in 2024, unless the Meloni government decides to renounce it; if he were to do so, however, he would at least risk cooling relations with Beijing, or suffering retaliation.
Meloni, however, had already defined the signing of the memorandum on the Belt and Road Initiative as a "big mistake". "I would hardly see the political conditions" for his renewal, he specified during a press conference before the bilateral with Xi, on the sidelines of the G20 summit in Bali. Defense Minister Guido Crosetto had also said , in this regard, that "our position will not change, so I see a possible renewal as unlikely".
WHAT WILL THE GOVERNMENT DO WITH PIRELLI?
According to Bloomberg sources, in order not to risk an open confrontation with Beijing, according to Pirelli, Italy will not adopt measures aimed exclusively at China, but at all those countries that are not considered strategic partners.
The Meloni government – writes the agency – "will soon have the opportunity to intervene on Pirelli" through the so-called golden power , or those special powers to which the executive can appeal to protect the national interest in strategic sectors, for example blocking agreements or imposing certain conditions.
Pirelli recently informed the Italian government of its intention to renew a pact between Sinochem (which owns 37 percent of the shares, through Marco Polo Int. Italy Srl) and Camfin (it owns 14 percent). Camfin is the holding controlled by Marco Tronchetti Provera, the CEO of Pirelli.
Given the Chinese presence, Pirelli – according to the rules of golden power – will have to get the majority of commercial decisions approved by the Italian government.
THE OTHER PIRELLI SHAREHOLDERS
The other Pirelli shareholders are the Silk Road Fund, the investment fund of the Chinese government, with 9 percent; LongMarch, the Chinese tire company, with 3.6 percent; and Brembo, the Italian braking system company, with 6 percent.
THE INDISCRETIONS ON SINOCHEM OUTPUT FROM PIRELLI
Yesterday's news – according to some reconstructions of financial circles – allow us to better interpret what happened in recent days between the lines. In fact, in mid-February the Chinese holding company Sinochem – again according to Bloomberg – was considering leaving Pirelli. The indiscretion caused tension on the shares of Bicocca.
SINOCHEM'S DENTAL ABOUT PIRELLI
But the news was denied: “The press article according to which Sinochem is evaluating the sale of its shareholding in Pirelli is not true. Sinochem has no plans to sell its stake in Pirelli,” attested a note from the Chinese group, which holds the relative majority stake in Pirelli.
BETWEEN NEWS, DENTALIES AND INTERPRETATIONS
So, how to read the news on the potential use of golden power by Palazzo Chigi? Analysts straddling finance and geopolitics reason: those indiscretions could have been the result either of a misunderstanding or of a strategy, i.e. to flash the exit of the Chinese to test the reaction of the markets in view of an action that was already in a nutshell from part of Palazzo Chigi.
THE ROLE OF TRONCHETTI TESTS
In short, Tronchetti is in fact in anguish. Pirelli 's shareholders are bound by a shareholders' agreement renewed last year a year in advance, which will enter into force in the spring with the approval of the 2022 accounts by the shareholders' meeting and will expire in 2026. The agreement establishes the governance and management rights which assign the presidency to the Chinese, currently held by Li Fanrong, and the operational management to the Italian shareholders, exercised by the executive vice president and CEO, Marco Tronchetti Provera , and by Giorgio Bruno, deputy-CEO.
FUTURE WITH BREMBO?
"In the recent past – Corriere della Sera wrote in recent weeks – there had also been talk several times of a possible combination with Brembo, today a retail shareholder in Pirelli with 5.2 per cent and the world's leading manufacturer of braking systems, in part of a project for the creation of an Italian pole of intelligent tires, a technological segment in which the Bicocca group is investing heavily".
THE TOP MANAGEMENT OF BREMBO SCHISCI
But in recent days the top management of Brembo – which has an agreement with Pirelli in any case – ruled out a merger between Pirelli and Brembo, which for some brokers such as Equita and Akros could penalize the valuations of the Bombassei family group. For the president Matteo Tiraboschi it is still early to hypothesize the "potential common areas of development and innovation": "we have reached an alignment agreement on our positions but – he said in March – it is all still too premature".
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/pirelli-sinochem-governo-meloni/ on Wed, 05 Apr 2023 11:29:30 +0000.