Pirelli Shares Deflate in Relisting Under New Chinese Owner

Shares of Pirelli & C SpA dipped in the trading debut for their Milan initial public offering (IPO), as the well-known Italian tire maker’s value slipped two years after being bought by former Chinese rival China National Chemical Corp. (ChemChina).

The weak debut that saw Pirelli’s shares fall 0.5% on Wednesday capped an equally unimpressive earlier performance for the company’s IPO shares, which sold at the lower end of their range with a final price of 6.40 euros ($7.52). The stock had dipped as much as 3.3% during the first trading session.

At its first-day closing price of 6.47 euros, the company is worth about 6.5 billion euros, or about 8.5% less than its 7.1 billion euro valuation when the landmark deal was signed two years ago. But due to weakening of the U.S. dollar over that period, the latest market value is roughly unchanged in dollar terms in the two years since the deal was closed.

ChemChina originally purchased 65% of Pirelli, at which time the Italian tire maker was publicly listed. It later de-listed with the understanding that ChemChina would restructure the company and reduce its stake to below 50% with a future re-listing.

As part of the reorganization, ChemChina took over operation of Pirelli’s lower-margin industrial tire business. That left behind its better-performing consumer business, whose customers include the likes of Formula One racing cars, as well as German luxury brands Mercedes and BMW.

Pirelli is one of Italy’s best-known brands, with a history dating more than 140 years. Its takeover reflects a broader wave of overseas purchases by big Chinese firms, which are trying to extend their global reach and also create synergies by bringing their acquired companies’ products to China. In a much larger deal that closed earlier this year, ChemChina purchased Swiss seed and pesticide giant Syngenta AG for $43 billion.

Contact reporter Yang Ge (geyang@caixin.com)