ROME, April 13 (Reuters) - China's Sinochem said on Monday it may lodge a legal appeal against curbs set by Italy's government to limit its influence over tyre maker Pirelli. "The company expresses
China's Sinochem warns Italy it may appeal to court against curbs on Pirelli
Sinochem Faces Legal Battle Over Italian Government Restrictions
By Giuseppe Fonte and Giulio Piovaccari
ROME, April 13 (Reuters) - Chinese state-owned company Sinochem said on Monday it may lodge a legal appeal against curbs set by Italy's government last week to limit its influence over Pirelli, escalating a long-running governance spat affecting the Italian tyre maker.
Golden Power Rules and Board Representation
Among the terms set under golden power rules nL1N40T0SU designed to preserve national interests in corporate matters, Italy cut the number of representatives Sinochem can name to Pirelli's next board to three from eight, in an effort to avoid U.S. restrictions on the Italian group.
Sinochem's Response to the Decision
"The company expresses its deep regret regarding this decision and reserves the right to pursue all necessary legal remedies to safeguard its legitimate shareholder rights and interests," Sinochem said in a statement issued by its unit, Marco Polo International Italy.
Pirelli's U.S. Expansion and Shareholder Structure
Current Shareholders and Expansion Plans
PIRELLI PLANNING U.S. EXPANSION
Sinochem, which produces and trades chemicals and fertilisers, is Pirelli's largest shareholder with a 34% stake. Camfin, the vehicle of Italian businessman Marco Tronchetti Provera, holds around 26%, with plans to increase it to up to 29.9%.
Impact of Sinochem's Stake on U.S. Expansion
Both Pirelli and Camfin have called for restrictions on Sinochem, saying that its ownership position complicates Pirelli's expansion plans in the U.S., as Washington tightens restrictions on Chinese technology in the automotive sector.
The U.S. is a key market for Pirelli's premium tyre business.
Government-Imposed Restrictions and Market Implications
Corporate Role Limitations and Information Withholding
Italy barred Sinochem representatives from holding top corporate roles such as chairman or chief executive, while also requiring Pirelli to withhold sensitive information from its Chinese investor.
"Such measures are discriminatory and will inevitably have a negative impact on Italy's investment climate," Sinochem said.
Duration and Conditions of the Curbs
The curbs will remain in force as long as Sinochem retains a stake in Pirelli above 9.99%, a sign that Rome wants Sinochem to cut its shareholding.
Reuters reported last year that Sinochem was ready to assess offers with a market premium from potential bidders for all or part of its Pirelli stake.
Share Transfer Notification Requirement
One of the new prescriptions requires Sinochem to notify the government of any share transfer, which must not be made in favour of entities affiliated with or controlled by the Chinese government.
Italy's Evolving Stance on Chinese Investments
Italy has progressively adopted over the last few years a harder line on Chinese forays into its companies due to security reasons.
(Reporting by Giuseppe Fonte in Rome and Giulio Piovaccari in Milan, editing by Gavin Jones, Rod Nickel)
