Pirelli to buy 49% stake in China's Jining Shenzhou Tyre

YANZHOU, China—Pirelli & C. S.p.A. has struck a deal with China's Hixih Rubber Industry Group to buy a 49 percent stake in Jining Shenzhou Tyre Co., the new name for Hixih's tire manufacturing entity in Yanzhou.

The investment will give Pirelli the necessary production flexibility in the high-value tire segment in Asia, taking into account the evolution of the Chinese market, the expected developments in electric vehicles and the growing share of OE homologations with car companies in China, Japan and South Korea.

Under the terms of the agreement, Pirelli will pay roughly $75 million for the 49-percent stake in Jining Shenzhou Tyre with the right to increase the stake to 70 percent between Jan. 1, 2021, and year-end 2025.

Pirelli will take over management of the plant, set up in 2005 in the Yanzhou Hixih Industrial Park with technical assistance from Pirelli. The plant has rated annual capacities of 1.2 million radial truck tires, 10 million car tires and 3 million high-performance motorcycle tires, according to Hixih Group.

Pirelli said the deal reinforces its high-value strategy, which identifies Asia/Pacific as a key growth driver and calls for the continuous improvement of the product mix, the digitalization of processes and constant attention to environmental sustainability.

The transaction is subject to approval by relevant local authorities and is expected to close by year-end, Pirelli said. The deal leaves all targets indicated in the 2017-2020 industrial plan unchanged.

Pirelli also said it intends to concentrate local research and development activities at the factory's complex in the Hixih Industrial Park in Yanzhou, near Pirelli's existing Chinese production hub. This will further reinforce Pirelli's operations in Yanzhou.

Pirelli and Hixih Group also are involved in another venture, Tongli Tire Co. Ltd., a commercial tire producer that goes to market under the brand name "Road One."

Hixih disclosed plans in July 2017 to expand capacities at both factories.

Founded in 1989, Hixih Group is also active in conveyor belting (in a joint venture with Continental A.G.), steel cord (in a venture with Bekaert N.V.), real estate and power generation.