Italy Becomes China Favorite Place for Deals with Pirelli
Italy has become China’s favorite destination for takeovers.
With ChemChina’s planned purchase of the iconic tiremaker Pirelli SpA, acquisitions by the country in Italy total almost $14 billion in the last 12 months, according to data compiled by Bloomberg. That ranks Italy ahead of the U.S and the U.K.
“Italy is the place to go for Chinese companies as they can find industrial innovation, know-how, established brands and the managerial creativity they are looking for,” said Giuliano Noci, vice rector for China at Milan’s Polytechnic University.
Italy is an easy target because domestic investors lack sufficient capital to transform their companies into global players and the government doesn’t have the power — or cash — to defend national champions, Noci said.
Prime Minister Matteo Renzi, who’s struggling to cut Europe’s second-biggest sovereign debt of more than 2 trillion euros ($2.2 trillion), is seeking to boost foreign investment as the country struggles to emerge from its longest recession on record. In October, Renzi signed deals worth 8 billion euros with Chinese Premier Li Keqiang.
“It’s obvious that Italy is finally on the radar screen of Chinese investors and we see a good number of mid-sized deals happening,” said Marco Marazzi, a partner for the law firm Baker & McKenzie in Milan who moved to Italy in 2013 from Shanghai to focus on Chinese investments. “At the same time, we hope that the same opportunities will be offered to Italian companies in China.”
Euro Decline
Chinese investment may rise even further if Pirelli’s minority investors succeed in squeezing more money from bidder ChemChina. Pirelli shares traded at as high as 15.63 euros in Milan on Tuesday, maintaining their level above the 15 euro-per-share offer from the state-owned company.
The decline of the euro against international currencies including the U.S. dollar and the Chinese yuan is also making Italian companies attractive for foreign firms. The automotive and transport industry in Europe was one of the first sectors to lure interest from Chinese companies. It remains one of the top recipients, with more than $7 billion worth of deals through the end of 2014, including Dongfeng Motor Corp.’s investment in French carmaker PSA Peugeot Citroen, according to a report from Baker & McKenzie.
Blue Chips
Chinese global cross-border acquisitions topped $73.3 billion in the last 12 months, up 26 percent, data compiled by Bloomberg show. In November, State Grid Corp. of China completed the purchase of a stake in Italian energy grids holding company CDP Reti SpA for 2.1 billion euros, the biggest Chinese investment in Europe in 2014.
Six months earlier, state lender Cassa Depositi & Prestiti SpA’s strategic fund sold a 40 percent stake in Ansaldo Energia SpA, formerly owned by state-controlled defense holding Finmeccanica SpA, to Shanghai Electric Group Co.
People’s Bank of China has stakes in some of Italy’s biggest companies, including Fiat Chrysler Automobiles NV, Telecom Italia SpA and Assicurazioni Generali SpA, as well as Eni SpA and Enel SpA.
China’s purchases represented 27 percent of foreign investment in Italy in 2014, according to KPMG LLP. Those deals included the acquisition of fashion house Krizia SpA by Shenzhen Marisfrolg Fashion Co.
“The trend will continue because, from one side, the brands of Italy have a long story, are respected all over the world, and as Chinese we need this,” Zhu Chongyun, chairman of Shenzhen Marisfrolg Fashion, said last month in a Bloomberg TV interview in Milan at Krizia’s headquarters.
“And from the other side, in China, after 20 years of reforms, we also have a lot of excellent entrepreneurs.”
Source: Bloomberg
