Pirelli IPO set for October

Milan, Italy — Pirelli & C SpA is moving ahead with plans for an initial public offering on the Borsa Italiana, declaring its intent to sell up to 40 percent of the firm's equity capital starting in October.

The company, majority owned indirectly by China National Chemical Co. (ChemChina) since late 2015, plans to carry out the IPO in two forms — a public offering in Italy and a global private placement for "qualified" institutional investors, the company disclosed this week.

Pirelli did not disclose any pricing or valuation information at this time, but Italian business media put the company's value at up to $10.2 billion (€8.5 billion), based on reports by analysts involved in the transaction.

The reorganised Pirelli comprises the firm's consumer activities — passenger, light truck and motorcycle tires — following the demerger of the commercial/industrial businesses into a new company, Prometeon Tyre Group Srl. The resultant company is expected to report annual sales in the neighborhood of $5 billion.

At the same time, Pirelli's shareholders agreed at a meeting 31 Aug to reconfirm Ren Jianxin and Marco Tronchetti Provera as chairman and executive vice chairman/CEO, respectively, of the company, and to expand the board of directors to 15 members from 14.

Prometeon Tyre comprises the truck, bus, agricultural and OTR tire businesses de-merged from Pirelli.

The shares to be available in the global offering are to be sold by Marco Polo International Italy SpA, which holds 100% of the company's share capital. Marco Polo in turn is controlled by Fourteen Sundew S.à r.l. (a company indirectly controlled by ChemChina) with a 65% share; Camfin SpA with a 22.4% share; and Long-Term Investments Luxembourg SA, with 12.6%.

Pirelli said it will determine the aggregate number of shares to be made available in the global offering immediately before the commencement of the deal. That determination could include a "greenshoe" option — a provision that gives the underwriter the right to sell more shares than originally planned by the issuer if the demand for that issue is higher than expected.

The commencement of the global offering will be subject to market conditions and to the receipt of the authorisation to the admission to listing by Borsa Italiana, Pirelli said, and to the approval of the prospectus by CONSOB (Commissione Nazionale per le Società e la Borsa), the public authority responsible for regulating the Italian financial markets.

It is expected that the listing of the shares will commence in October, subject to the prevailing market conditions at the time, Pirelli said.

At the 31 Aug shareholders' meeting, the gathering approved by-laws that expressly provide, among other things, that Pirelli's "corporate governance will be inspired by best international practices."

With a view to protecting all shareholders, Pirelli said specific by-laws provisions also are included with the aim of preserving over time "Pirelli's constitutive and intrinsic elements," such as the continued presence in Italy of the group's headquarters and executive offices, as well as control over its technological know-how (including the Pirelli trademarks).

In particular, the by-laws provide that Pirelli's technological knowhow must continue to be owned by Pirelli and may not be transferred to third parties, except to the extent provided under the by-laws.

The new by-laws also spell out the role of Tronchetti Provera in guiding top management and ensuring continuity in Pirelli's business culture as well as his input in the designation of his successor in 2020.

In addition, the shareholders agreed to expand the board of directors to 15 members, adding one additional independent director, to be appointed at the first shareholders' meeting of Pirelli to be held after the IPO. This change will ensure that independent directors will comprise the majority of the board of directors.

The current board of directors, who will remain in office for three years starting 31 Aug comprises: Ren; Tronchetti Provera; Yang Xingqiang; Bai Xinping; Giorgio Luca Bruno; Ze'ev Goldberg; Giovanni Tronchetti Provera; Laura Cioli; Domenico De Sole; Fan Xiaohua; Marisa Pappalardo; Cristina Scocchia; Tao Haisu; and Wei Yintao.

In the context of the Transaction, Banca IMI, J.P. Morgan and Morgan Stanley are acting as joint global coordinators and joint bookrunners, while BNP PARIBAS, BofA Merrill Lynch, Goldman Sachs International, HSBC, Mediobanca and UniCredit Corporate & Investment Banking are acting as joint bookrunners.