If Pirelli’s sale to the ChemChina-led consortium in 2015, along with the legal and integration work in 2016 wasn’t enough, 2017 is proving to have been another complex and busy year for Pirelli. The last 12 months have seen the company pass two key landmarks in its post-acquisition strategy: the separation of the industrial tyre business (including industrial, truck, OTR and agricultural operations) into the new Prometeon Tyre Group in the first part of year; and the successful re-listing of the Pirelli in the autumn. The latest news is that Pirelli’s major shareholder – Marco Polo International – has increased its shareholding in Pirelli following the IPO by exercising a greenshoe option.
In short, Pirelli’s late September re-listing was a roaring success for its shareholders. Indeed, one Nasdaq article written in early October headlined it this way: “ChemChina makes quick buck from Pirelli flip” before explaining that ChemChina is set to make “private equity-style” profit from Pirelli’s stock market return. The term “flip” was used to denote just how quickly Pirelli returned to the stock market just 23 months its was bought by a consortium including long-term chief executive Marco Tronchetti Provera and led by ChemChina.
However, it wasn’t all plain sailing. The shareholders had to substantially lower their price expectations in order to woo institutional investors. In the end shares flew through the stock market priced at 6.5 euros per share – well below the 8.3 euros peak of the initial price range.
The IPO brought with it roughly 2.6 billion euros in cash, and left the group with a combined 60 per cent stake valued at 3.9 billion euros. In other words the owners made an internal rate of return of 25 per cent.
But it didn’t end there. On 3 November Pirelli shared that J.P. Morgan Securities plc partially exercised a greenshoe option in which 18,904,836 shares, an amount equal to around 1.9 per cent of Pirelli’s share capital, were purchased out of a total of 50,000,000 option shares. Upon completion, Marco Polo International Italy S.p.A. will hold 631,095,164 Pirelli ordinary shares, and therefore a 63 per cent share in Pirelli. (A Greenshoe option is a special IPO provision, which allows for the sale of more shares than planned in cases of strong demand).
This, together with ChemChina’s decision to allow its ownership of Pirelli’s stock to fall back was characterised by sources such as Reuters as representing efforts by the Chinese to present a more friendly face to European investors. At the time it was estimated that ChemChina would hold slightly less than half the firm after the IPO. And this means a shareholding of between 45 and 46.7 per cent.
Meanwhile, Pirelli has continued to demonstrate its success in terms of financial results.
