Pirelli JV to Take Over Sibur Russian Tyre Assets
Pirelli has agreed to take over the assets of Sibur Russian Tyres after signing a memorandum of understanding (MOU) with Russian Technologies and oil major Sibur Holding in Moscow on Friday 26 November. The deal, which is likely to position Pirelli as major player in the Russian market, comes after domestic market leader Niznekamskshina, (owned by another oil major, Tatneft) confirmed it had been in merger talks with Sibur in August. However, the latest MOU even goes as far as leaving the door open for a partnership that may offer Pirelli “a further opportunity for development and consolidation through the possible acquisition of or merger with Nizhnekamskshina.”
The announcement comes a year after Pirelli signed an initial MOU with Russian Technologies at earlier talks in Moscow and less than a month after news reports quoted Sibur executives as saying the company planned to exit the tyre business. According to the Milan-based tyre manufacturer, the latest transaction is expected to close by June 2011. No financial details have yet been disclosed.
Pirelli to take a 10% stake in Sibur Russian Tyres
The cooperation will see the companies engage in a series of joint activities in the tyre and steel cord sectors following the establishment of two joint ventures. As a result Sibur Holding will cede much of its car, agricultural and truck radial production assets to a 50:50 joint venture between Pirelli and Russian Technologies. This entity will maintain a 90 per cent stake in the assets and Sibur Holding will hold the remaining 10 per cent. Pirelli will manage these assets from the start, which is expected to lead to the establishment of a production capacity including 3 million predominantly ‘winter’ car tyres by the end of 2011.
A further 50-50 joint venture between Pirelli and Russian Technologies (JV2) will see Sibur Holding cede 40.1 per cent of Sibur Russian Tyres, a company belonging to the Russian holding containing other tyre activities). JV2 will receive the OE car tyre production assets, as well as those for the production of truck and conventional agricultural tyres. According to an official statement, the value of the transaction will be determined on the basis of a valuation being carried out by “an adviser chosen by the partners.”
Pirelli will also directly acquire 10 per cent of Sibur Russian Tyres in exchange for its managerial and technical input. Pirelli will therefore license its technology and production processes, participate in the plants’ technological upgrade, and provide its know-how in the areas of logistics, quality control and the organization of activities. Once these transactions and the reorganization of the activities of Sibur Russian Tyres by Pirelli, Russian Technologies and Sibur Holding are completed, Sibur Holding will have a 49.9 per cent stake in Sibur Russian Tyres compared with its present 100 per cent.
A new technological link between the two groups in synthetic rubber is also expected to facilitate the introduction of new kinds of synthetic rubber to improve tyre performance. Further, the deal is designed to help create synergies between the automobile, tyre and synthetic rubber sectors in Russia, improve the offering to customers and enhance the international competitiveness of the Russian tyre and Auto industry.
A diplomatically worded statement issued by Pirelli reports that the MOU “lays the foundation for the joint launch of a process of rationalization and reorganization of the tyre activities of Sibur Holding,” one of Russia’s major operators in the petro-chemical sector.
A new technological link between the two groups in synthetic rubber is also expected to facilitate the introduction of new kinds of synthetic rubber to improve tyre performance. In practical terms this means Sibur Holding will act as a long-term supplier to Pirelli and the two joint ventures, as well as for the joint development of “new high-technology products.” Further, the deal is designed to help create synergies between the automobile, tyre and synthetic rubber sectors in Russia, improve the offering to customers and enhance the international competitiveness of the Russian tyre and Auto industry.
Sergey Chemezov, director general of the Russian Technologies State Corporation, said: “In order to be more competitive it is necessary to cooperate with companies which apply advanced technologies and solutions. It is the basis of our collaboration with Pirelli. We are determined to keep to the same rules in choosing our partners from now on.”
Alexander Dyukov, Chairman of the Board of Directors of Sibur Holding OJSC, commented: “Partnership with one of the world’s leading tyre producers and a Russian company that represents the automotive industry opens the challenge for Sibur`s tyre business. Following possible consolidation of the Russian tyre sector using advanced western technologies will increase marketability of national economics and help Sibur to increase capitalization of its investment in this segment.”
Marco Tronchetti Provera, Pirelli chairman, concluded: “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…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.”