Formula 1 has been dominated by European manufacturers for as long as it existed, but it seems that things are about to change. ChemChina is short for China National Chemical Corp, a state-owned company that has decided to buy out Pirelli, the F1 tyre manufacturer.
It seems that China will enter Formula 1 by buying 26% of shares of Pirelli, which is enough to take part in controlling the company. The price for the initial part of their plan will be almost two billion euros. The person behind the sale is the CEO of the company Marco Tronchetti Provera.
After the initial purchase, ChemChina will continue buying out Pirelli. It has been estimated that the company will eventually be sold for nearly eight billion dollars. The price is in accordance with the value of one of the few remaining symbols of the power of Italian automobile industry.
ChemChina is a company based in Beijing that’s present in many different businesses, including petrochemicals, agricultural chemicals, oil processing and chemical equipment. Their plan is to keep Pirelli stable until a new strategy is developed. It seems that the expansion of the business is on top of their list.
The expansion, however, won’t be an easy task. As a company with over 140 years of history, Pirelli is already a multi-national that creates revenues of more than six billion euros per year. Apart from all that, it is at the moment the only tyre supplier Formula 1 deals with.
After the merger, Pirelli will become a part of a bigger company, along with China National Tire & Rubber. This is one of ChemChina’s subsidiaries that deals in off-the-road and steel radial tyres. Provera believes this to be a great opportunity for Pirelli to become the leader in the tyre industry.
It is expected that the merger will strengthen the company as a whole, giving it the opportunity to cover a wider area. As a result, according to the words of Marco Tronchetti Provera, also CEO of Mediobanca, Pirelli should be able to double its volumes as a tyre supplier. Although this might seem too optimistic, the people behind the sale are confident in the success of the integration.