Pirelli Board Rejects Sinochem's Proposal to Spin Off Cyber Tyre Division

Pirelli's Governance Dispute with Sinochem

ROME, Feb 5 (Reuters) - The board of Italian tyremaker Pirelli opposes any spin off of its cyber tyre activities, the company said on Thursday, reacting to a plan put forward by Chinese shareholder Sinochem to settle a governance dispute.

Board's Voting Outcome

Directors are against "any project or initiative that might lead to any form of compartmentalization, separation and/or segregation, even only partially, and of any nature," Pirelli said in a statement.

Impact on U.S. Expansion

The board backed the position with a 9-5 vote, with five Chinese-appointed directors voting against, it added.

Government Scrutiny and Shareholder Pact

Beijing-controlled Sinochem is Pirelli's largest shareholder with a 34.1% stake while Camfin, the vehicle of Italian businessman Marco Tronchetti Provera, holds a 25.3% stake, with plans to increase it to up to 29.9%.

Camfin and Pirelli have said that having a Chinese company as the main shareholder poses a hurdle to the group's U.S. expansion, as Washington tightens restrictions on Chinese technology in the automotive sector.

In response, Sinochem last month said it had proposed a "structured solution" to the dispute.

A person close to the matter said at the time that the solution entailed spinning off some Pirelli assets into a separate corporate entity to distance those activities from the company's Chinese investor.

Pirelli on Thursday also said it had notified the Italian government about the non-renewal of the Sinochem-Cafmin shareholder pact, thus triggering government scrutiny under golden power rules aimed at shielding key assets.

(Reporting by Alvise Armellini, editing by Susan Fenton)