Aeolus to fully absorb Pirelli industrial tire unit, raise project funds

Jiaozuo, China – Aeolus is to acquire a 90% stake in Pirelli’s industrial tire unit Prometeon Tyre Group, among other industrial tire assets, at €790 million (5.8 billion yuan) estimated total price through share issuance, according to its 13 April filing. The deal is pending regulatory approval.

Upon completion of the deal, Aeolus will become the world’s fourth largest and China’s largest industrial tire maker with 18 million units/year capacity, 18,500 employees and €2.7 billion annual revenue, said the filing. Last year the company posted a 10% drop in total revenue to €1 billion.

Aeolus currently owns 10% of Prometeon, and the remaining 90% is valued at €632 million. Other targets of the takeover include full stakes in Guilin Beili, which has 1 million annual capacity for truck and bus tires, and certain land and property of Qingdao Yellow Sea. Both companies are ChemChina affiliates.

Aeolus is also raising up to €275 million through private placement for a series of expansions in China as well as Prometeon’s sites overseas.

Prometeon’s plant in Izmit, Turkey has earmarked €74 million for investment in a truck & bus tire project and €17 million for an agricultural tire project in Brazil. Both are scheduled to start operations in 2020.

An additional €26 million will be pumped into the upgrade of the Spiral Advanced Technology for Truck (SATT) at the Brazil facilities, expected to be completed over two years. Prometeon’s HQ in Milan will also receive €27 million for IT system upgrading.

On the domestic front, Aeolus is setting up a global industrial tire research center in its HQ city of Jiaozuo with a €20-million investment in two years. The city will house an expansion project as well for jumbo tire and other engineering tires with a €21-million investment and an 18-month construction period.

The company is also spending €91 million on facility upgrades in Guilin, Jiaozuo, Taiyuan and Qingdao over a period of four years.

“[Such projects] will help Aeolus optimise its global capacity allocation, more efficiently utilise its resources and better cater to its local customers with a stratified branding strategy,” said the company’s filing.