EU paves way for Chinese Pirelli takeover

The road is clear for a Chinese takeover of iconic Italian tire maker Pirelli, after EU antitrust regulators on Thursday announced they had approved China National Chemical Corporation's (ChemChina) 7.1 billion-euro ($7.9-billion) acquisition bid.

"The Commission's investigation found that the proposed transaction would raise no competition concerns as the market share increments are modest, the two companies are not close competitors, and customers will continue to have an adequate number of alternative suppliers in all markets," the European Commission (EC) said in a statement.

The go-ahead comes some four months after the state-owned, Beijing-based chemical company announced plans to buy a 26.2-percent stake in the world's fifth-largest tire maker, which was founded 143 years ago in Milan. The joint venture, spearheaded by ChemChina subsidiary China National Tire & Rubber, then also expressed its intention to secure a majority stake later on.

"All parties involved are working to finalize the other closing conditions 'for the Pirelli deal' in the shortest possible timeframe," ChemChina said in a statement.

A successful takeover would increase ChemChina's share of the global tire market to around 10 percent. The corporation is already China's largest producer of automotive brake hose and high-strength converyor belts, in addition to being the leading domestic producer of radial and off-road tires.

Unfair advantage?

The EC's decision is likely to rekindle the debate here in the EU about whether foreign state-owned enterprises should be allowed to bid on privately owned European companies.

Critics worry that the Chinese government - representing the world's second-largest economy - could use its almost unlimited financial power to gain an outsize influence in Europe by gradually buying up the pearls of the continent's industry. Similar concerns have swept Africa, where Chinese companies have gained a significant foothold in recent years by outbidding the competition on everything from local businesses to large-scale infrastructure projects.

However, the EU Competition Commission, which initiated an investigation into the proposed takeover in March, dismissed such worries in the case of ChemChina.

"The fact that [China National Chemical Corporation (CNRC)] is a state-owned enterprise only plays a role insofar as it is examined whether, in addition to CNRC, other state-owned enterprises are active in the markets relevant for Pirelli, in order to analyze potential impacts on competition," a spokesperson for the antitrust body said, responding to an inquiry by DW.

The spokesperson added that "it plays no role for the EU's corporate merger assessment analysis that CNRC is a foreign company."

"The European Union is an open market economy and profits from trade with third countries. Direct investments by European companies outside the EU significantly exceed direct investments by non-European companies in the EU."