Pirelli set to end shareholder pact with Sinochem

Milan, Italy – Pirelli & C. SpA is preparing to end its shareholder agreement with Chinese investor Sinochem, with the shareholder pact set for expiry on 18 May.

Speaking during a 25 Feb full-year earnings call, the Italian group's executive vice chairman Marco Tronchetti Provera confirmed that the current pact will not be extended.

“There are no ongoing negotiations with Sinochem. We are going to end the pact, we will not renew the pact in May next,” the Pirelli executive told analysts.

The shareholders’ agreement entered into force on 19 May 2023 and was originally signed in May 2022 by entities including Sinochem-owned China National Chemical Corp. (CNRC) as well as Italian shareholders Camfin and companies controlled by Marco Tronchetti Provera (MTP).

The latest development follows tensions between Pirelli’s Italian and Chinese shareholders linked to US regulatory requirements for connected vehicles.

In January, Italian shareholders Camfin and MTP & C. SpA decided not to renew the agreement with Sinochem’s CNRC unit, citing concerns over the potential impact of the rules.

The US Bureau of Industry and Security (BIS) is expected to implement the connected-vehicle regulations by 17 March.

Among other measures, the regulation restrict the use of key sotware/hardware components linked to Russia or China.

The regulation will, in particular, affect Pirelli’s 'cyber tire' technology, which allows tires to communicate in real-time with vehicle systems and road infrastructure.

In early February, Pirelli’s board rejected a proposal by CNRC to segregate the 'cyber tire' activities into a separate entity in order to address US regulatory requirements.

The board voted nine to five against the proposal, agreeing with Pirelli CEO Andrea Casaluci that the 'cyber tire' activities must remain integrated within the group.

Management warned that separating the business could “irreversibly undermine the integrated business model” and risk transferring patents to a separate entity, potentially “inhibiting their free use by Pirelli.”

During the earnings call, Tronchetti Provera said the Italian government is currently reviewing the situation under the country’s “Golden Power” rules governing strategic assets.

“What we can confirm is that clearly the government, the minister of industry, stated that Pirelli will be in a position to enter in all markets, obviously including the American market, with its technologies,” Tronchetti stated.

The Pirelli executive added that it expects to comply with US regulatory requirements linked to connected-vehicle security.

“We don’t see an issue looking forward and so we are sure that Pirelli will be in a condition to fulfil the requirements,” he said.