Pirelli: a solid company that is about to return to the stock-exchange

Who is Pirelli today?A�From what we know about the company today, Pirelli cannot be put in the same category as the company founded in Milan by the twenty-four-year-old engineer Giovanni Battista Pirelli in 1872. Initially, the company was only going to produce elastic rubber articles (the real industrial novelty of the time), and various articles of vulcanised rubber.

The great curiosity for the technological innovations cultivated by the young Pirelli allowed him to experience the new emerging applications for the industry, and already in 1879 he had produced cables for underwater telegraphic transmissions. In 1890 he patented the first tyre for bicycles and in 1902, his was one of the first Italian companies to relocate abroad (more precisely, to Spain).

That was in the early twentieth century when Pirelli had a dual role in the automotive retail market for tyres and sponsoring sporting events – mostly motorised – where the performance of two and four wheeled heroes became eternally linked to the performance of the tyres they ran on. In 1907, an Itala 35/45 HP won the tremendous Beijing-Paris raid on Pirelli tyres, and in 1913 Pirelli is making tyres for Renault that wins the Formula 1 race in France. Even after a decade, the famous Superflex Cord tyre is still called “the tyre of victories.”

From the moment Pirelli started to mass-produce car tyres, more than a century has gone by, and throughout all these years the company has adapted, refurbished and even picked itself up after committing a few false steps, such as its failed takeover bids on Firestone and Continental that, at the end of the 1980s, cost the chair to the last Pirelli family member, Leopoldo.

Today, thanks to the sale of Pirelli to the Chinese, Marco Polo, Pirelli is a company that lives dynamically and innovatively in the contemporary world, boasting of a user-oriented business presence in more than 160 countries and the participation as a sponsor or supplier in more than 400 competitions, typically in motorsports, such as Formula 1 and Superbikes, where it is the exclusive supplier.

Pirelli has always been self-defined as a company dedicated to people enhancement and environmental protection. In this regard, it is no coincidence that it now employs more than 1,400 researchers around the world, half of whom work in Italy. With regard to environmental sustainability, Pirelli embraced the United Nations Global Compact model, according to which the responsible management of resources and economies must be closely observed at every moment of the production chain.

To give an idea of the company’s concern in safeguarding its employees and environmental conditions, merely consider that the company spent a�� 228.1 million in research in 2016, accounting for 5.8% of total premium revenue.

Today, with 20 production centres spread out over four continents, Pirelli is the sixth largest producer of retail and industrial tyres, although recent corporate events are re-modifying its corporate structure in order to ensure a simpler return to the Italian stock-exchange.

Pirelli and the stock-exchange: past, present and future

Pirelli was initially listed on the Milan Stock Exchange in 1922 and only seven years later it was also listed in New York: it was the first Italian company to achieve listing in the USA.

Following the successful IPO bid by the Chinese consortium, the company’s stock was withdrawn from the Italian stock-exchange within just one quarter on 6 November 2015. This was done by a press release, despite the fact that Marco Tronchetti Provera had already ventured the idea of a return to the stock-exchange as of the last quarter of 2017 or during the first quarter of 2018.

To make this happen, first of all, you need a simplification of the corporate chain, which must be accompanied by a careful financial solidification plan.

To better understand the process that will enable Pirelli to streamline the company’s stakeholding and then return to the stock market, some numbers need to be crunched. Starting from the assumption that 100% of the Pirelli shares are owned by Marco Polo, a point we will return to later on.

What was done to this end was a merger between Coinv SpA and Camfin. The former is indirectly controlled by Marco Tronchetti Provera, while the latter can count on the economic support from large banking groups such as Intesa San Paolo and UniCredit. The new entity created by the merger will retain the name of Camfin and will control 22.4% of Marco Polo in total. 65% of Marco Polo is owned by CNRC, which is in turn controlled by ChemChina, and ChemChina is owned by Pirelli’s current patron Ren Janxin. There is a 12.6% stake in Marco Polo to be accounted for, which belongs to the Russian company, LTI.

Summarising the above, the only owner of Pirelli today is Marco Polo, whose dividends belong to LTI for 12.6%, 22.4% to Camfin (Tronchetti Provera) and 65% to CNRC (ChemChina, Ren Janxin). Ren Janxin is president of ChemChina, and through this ownership, will therefore control CNRC, Marco Polo and Pirelli. Pirelli IPO has been confirmed by the financial time with article titledA�Pirelli tyres will race to market with new hands at the wheel and by Wards Auto with the article titledA�Pirelli to decide on IPO terms based on prospectus.

A first simplification, with the merger between the two Italian SpAs, has already taken place, but it is not excluded that there will be others prior to Pirelli’s return on the market.

As for the financial aspect, however, there should be no problem getting the financing needed by the consortium or banking groups interested in an immediate return of Pirelli on the stock-exchange (suffice to recall that Intesa San Paolo and UniCredit are already members of Camfin), and the whole process should be resolved in a series of capital injections for Marco Polo.

Finally, it should not be underestimated that Pirelli will only be present on the stock market as a consumer tyre company, in order to ensure greater stability ensured by the fact that the production of the industrial sector will be entrusted to another industrial group according to latest news belonging to Ren Janxin and not directly to Pirelli.

Ultimately, there seem to be all the conditions for an immediate successful return of the “Long P” company on the stock market, and many investors have already said they are ready to bet on this new Pirelli adventure which, according to what Tronchetti Provera states, is a “long-term project”.