Pirelli and Russian Technologies to absorb Sibur Russian Tyres

ERJ staff report (DS)

Moscow -- Pirelli, Russian Technologies and Sibur Holding today in Moscow signed a memorandum of understanding (MOU) to define a series of agreements which will radically re-structure the Russian tyre manufacturing sector. The closing is expected by June 2011.

The agreements call for a process of reorganisation aimed at selecting the assets of Sibur Russian Tyres that will be conferred to two joint ventures constituted by Pirelli and Russian Technologies (JV1, JV2). It also holds the option for Nizhnekamskshina to become involved.

The first joint venture (JV1) will receive the assets of Sibur Russian Tyres that are convertible to Pirelli standards in the car, agro radial and truck all steel sectors.

This unit will be a 50-50 joint venture between Pirelli and Russian Technologies. Pirelli will manage these assets, which will enable the achievement of a production capacity of around 3 million car tyres, predominantly 'winter', by the end of 2011.

The second joint venture (JV2) will receive the assets relevant to the production of car tyres for the original equipment sector, aimed at satisfying increasing demand in the Russian market, as well as those for the production of truck and conventional agro tyres. JV2 will also hold a significant stake in Sibur Russian Tyres.

This unit will also be a 50-50 JV between Pirelli and Russian technologies. Sibur will cede 40.1 percent of its shares in Sibur Russian Tyres to the venture.

Further, Pirelli will acquire a direct stake of 10% in Sibur Russian Tyres in exchange for its technical and managerial input. To this end, Pirelli will provide, under license, its technologies and production processes and participate in the technological upgrade of the plants, as well as providing its knowhow in the areas of logistics, quality control and organization of activities.

The end result of the complex ownership transfers will be that Sibur Holding will reduce its ownership of SIbur-Russian Tyres to just 49.9 percent, from the current 100 percent. Furthermore, Sibur will have a long-term contract to supply rubber to the different factories.

The agreement also holds the possibility of a possible acquisition of or merger with Nizhnekamskshina, a tyre producer controlled by Tatneft.

For Sibur, its tyre business will benefit from Pirelli's technology and with the Italian group's industrial support, Sibur's tyre also expects a significant improvement in its business results. The new technological link between the two groups in synthetic rubber will also facilitate the introduction of new kinds of synthetic rubber to improve tyre performance.

The MOU also calls for Pirelli and Russian Technologies to build a factory for the production of steelcord in Samara, in the special economic zone of Togliatti.

Marco Tronchetti Provera, Pirelli Chairman, said: “The agreement signed today is a significant acceleration of our push into the Russian market compared with the initial plan, with a financial commitment substantially in line with that forecast in our 2011-2015 financial plan. Russia is a key market for our strategy of growth in all business segments, consumer and industrial. The partnership announced today with two such important groups as Russian Technologies and Sibur Holding will allow us to also participate in the rationalization and consolidation of the Russian tyre market and to take advantage of possible opportunities linked to the acquisition of plants already equipped with a good level of technology.”

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Press release from Pirelli