Pirelli's Chinese Investor Considers Bond Sale to Ease US Scrutiny

Pirelli & C. SpA's Chinese investor, Sinochem, is weighing the sale of a convertible bond that would temporarily reduce its holding in the Italian tiremaker, Corriere della Sera reported, citing unnamed sources. The potential move is aimed at easing US government scrutiny of Pirelli, which has been under the microscope due to its foreign ownership.

According to Corriere della Sera, Sinochem is considering the sale of a convertible bond, which would allow the company to temporarily reduce its stake in Pirelli. The bond sale would not involve the actual sale of shares but would rather be a financial instrument that could be converted into shares at a later date. This move would effectively reduce Sinochem's direct stake in Pirelli, potentially alleviating concerns from the US government.

Sinochem, a Chinese state-owned chemicals conglomerate, acquired a 45% stake in Pirelli in 2015 as part of a consortium. The company's significant stake in the Italian tiremaker has raised concerns among US authorities, particularly with regards to national security and the potential for foreign influence over a strategic industry.

The US government has been scrutinizing foreign investments in strategic sectors, including aerospace, defense, and technology. While the tire industry may not be directly related to national security, the scrutiny of foreign investments has become more intense in recent years.

By selling a convertible bond, Sinochem would be able to temporarily reduce its stake in Pirelli, potentially easing US government concerns. However, the move would not necessarily mean a long-term reduction in Sinochem's ownership of the company. The bond could be converted into shares at a later date, allowing Sinochem to regain its original stake.

The potential sale of a convertible bond by Sinochem highlights the complexities of foreign ownership in strategic industries. As governments around the world increase their scrutiny of foreign investments, companies like Sinochem are being forced to navigate a complex web of regulations and concerns.

It is worth noting that Pirelli has been working to address concerns from the US government regarding its ownership structure. In 2020, the company announced plans to create a new holding company that would be listed on the Milan stock exchange, potentially reducing Sinochem's direct stake in the company.

While the potential sale of a convertible bond by Sinochem may alleviate some concerns from the US government, it is unclear how the move will impact Pirelli's ownership structure in the long term. As the situation continues to unfold, it will be important to monitor how the company's ownership structure evolves and how it may impact Pirelli's operations and relationships with its stakeholders.

Sources:
Corriere della Sera