China's Sinochem expected to keep Pirelli stake despite Italy's curbs -sources

By Giulio Piovaccari

MILAN (Reuters) -Chinese state-owned Sinochem Group is expected to keep its stake in Pirelli despite a move by the Italian government to limit its influence at the tyre maker, three sources close to the matter told Reuters.

Rome last week intervened over a governance agreement at Pirelli between its largest shareholder Sinochem and fellow investor Camfin, using "golden power" legislation that protects key national assets.

The ruling gave Camfin permanent power to designate the company's CEO and effective control over strategy but stopped short of demanding Sinochem cuts its stake or freezing its voting rights.

Camfin, the vehicle of Italian businessman Marco Tronchetti Provera, who has led Pirelli since 1992, holds a 14.1% stake while Sinochem has 37%.

While the ruling leaves Sinochem with little say in Pirelli's management, the company will likely remain a long-term investor, one of the sources said.

Sinochem declined to comment on Thursday.

More light will be shed on Sinochem's plans by looking at the profiles of candidates they designate for Pirelli's new board to be appointed at the end of July, the source said. That will give clues as to whether they plan to cooperate with Pirelli management or seek to push back with their own agenda.

The Chinese, who entered Pirelli in 2015 through ChemChina, now part of Sinochem, "are already in the money" with their investment, a second source said.

That source added that Beijing could see a retreat from Pirelli as a reputational setback, at a time of tenser relations between China and Western countries.

WHO WANTS TO BUY?

Pirelli shareholders also include China's state-owned Silk Road Fund, with a 9% stake, and Italian premium brake maker Brembo with around 6%.

A lack of suitable buyers would make a potential Sinochem exit from Pirelli difficult, a third source said.

An investor, or a group of investors, would have to fit Rome's golden power prescriptions, steer clear of antitrust requirements and also "have money", as Sinochem's stake is worth 1.7 billion euros ($1.9 billion) at current low market prices.

Big investment funds had looked at Pirelli, but they are not keen to do a deal with Tronchetti Provera calling the shots at the company, the third source said.

Pirelli was not reachable for comment.

(Reporting by Giulio Piovaccari; editing by Keith Weir, Matt Scuffham, Elaine Hardcastle)