MOSCOW (Nov. 26, 2010) — Pirelli & C. S.p.A. is set to become a major player in Russia's tire industry after agreeing to create a pair of joint ventures with Russian Technologies State Corp. designed to take control of and manage key Sibur Russian Tyres manufacturing assets and explore additional, new facilities.
The agreements, with RussianTechnologies and Sibur Holding, are covered by a memorandum of understanding signed today by the three parties in Moscow. The closing is expected by June 2011, Pirelli said. Financial aspects were not disclosed.
“The agreement...is a significant acceleration of our push into the Russian market compared with the initial plan...,” Pirelli Chairman Marco Tronchetti Provera said. “Russia is a key market for our strategy of growth in all business segments, consumer and industrial. The partnership...will allow us to also participate in the rationalization and consolidation of the Russian tire market and to take advantage of possible opportunities linked to the acquisition of plants already equipped with a good level of technology.”
The agreements call for a process of reorganization aimed at selecting the assets of Sibur Russian Tyres that will be conferred to two joint ventures constituted by Pirelli and Russian Technologies (JV1, JV2).
It also holds the option to purchase or merge with Nizhnekamskshina, an independent tire maker, Pirelli said, and for Pirelli to get involved in synthetic rubber and steel-cord production in Russia.
The first joint venture (JV1) — owned equally by Pirelli and Russian Technologies — will receive the assets of Sibur Russian Tyres that “are convertible to Pirelli standards in the car, radial agricultural and truck all steel sectors.” The JV will own 90 percent of and Pirelli will manage the selected assets, which will be capable of producing 3 million car tires, predominantly winter types, by year-end 2011.
The second venture (JV2) — also a Pirelli-Russian Technologies 50-50 entity — will receive Sibur assets relevant to the production of OE car tires and truck and bias-ply agricultural tires. JV2 will also hold a significant stake in Sibur Russian Tyres. Sibur will cede 40.1 percent of its shares in Sibur Russian Tyres to the venture.
Further, Pirelli will acquire a 10-percent stake in Sibur Russian Tyres in exchange for its technical and managerial input. To this end, Pirelli will provide, under license, its technologies and production processes and participate in the technological upgrade of the plants, as well as providing its knowhow in the areas of logistics, quality control and organization of activities.
The end result of the complex ownership transfers will be that Sibur Holding will reduce its ownership of SIbur-Russian Tyres to 49.9 percent. Furthermore, Sibur will have a long-term contract to supply rubber to the different factories.
The agreement also holds the possibility of a possible acquisition of or merger with Nizhnekamskshina, a tire producer controlled by Tatneft.
For Sibur, its tire business will benefit from Pirelli's technology and industrial support. The new technological link between the groups in synthetic rubber will also facilitate the introduction of new kinds of synthetic rubber to improve tire performance, Pirelli said.
The memorandum also calls for Pirelli and Russian Technologies to build a factory for steel cord in Samara, in the special economic zone of Togliatti.