Jiaozuo, China – Aeolus has signed an agreement to acquire a 10-percent stake in Pirelli Industrial and 100-percent stakes in ChemChina’s two truck and bus tire subsidiaries.
On the other hand, the deal – agreed earlier this month – will also see Aeolus sell an 80-percent stake in its passenger car tire unit to the Italian tire company.
The agreement, though, requires further internal and external approvals as well as patent-licensing agreements to be signed by Aeolus and Pirelli, according to a company statement.
All transactions will be settled in cash and Aeolus is projected to pay a difference of €113 million (830 million yuan) based on estimates of the targets’ net asset value. The company’s shares have resumed trading.
Aeolus’ earlier plan also included the acquisition of a third ChemChina tire affiliate and the full stakes of Pirelli Industrial.
The original framework, constituting “major asset reorganisation” for China-listed companies with assets involved accounting for over 50 percent of Aeolus’ total asset.
This requires more complicated procedures for regulatory approval and the company was unable to form a plan within the pledged period, explained its statement.
“The company will start a series of co-operations with Pirelli in research, technology, management and product quality,” said its statement. “Aeolus will also benefit from synergic effects brought by global resources.”
Pirelli Industrial, the holding company of Pirelli’s industrial tire units, is the market leader in Latin America for truck and agricultural tires and also a top player in Europe, the Middle East and Africa, with plants located in Brazil, Turkey and Egypt.
In 2015, Pirelli Industrial reported a €2.5-million net loss, due to delayed receivables from its Venezuela subsidiary, on €1.1 billion revenue.
Last year the company produced 4.3 million truck tires and 350,000 agricultural tires, down by 7 percent and 8 percent respectively from 2014.
ChemChina subsidiaries, Double Happiness Tyre Industrial in Taiyuan, Shanxi with 2.1 million unit annual capacity and Qingdao Yellowsea Rubber in Qingdao, Shandong with 1.2 million unit annual capacity, have both been running at a deficit.
Double Happiness saw €6.8 million net loss on €158 million revenue last year; Yellow Sea €7.8 million net loss on €90 million revenue.
Despite the deficit, the transactions would “help enhance scale effects and lower procurement costs through increased bargaining power,” said Aeolus’ statement.
The Aeolus passenger car tire unit with 5 million unit annual capacity had €9.2 million net loss on €69 million revenue in 2015.
After selling the unit, “the company will be able to focus on the research and marketing for industrial tires,” said the statement.