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Italian brake maker Brembo treads new path with Pirelli stake

MILAN (Reuters) - Italy's Brembo BRBI.MI, which make brakes for Ferrari RACE.MI, Tesla TSLA.O, BMW BMWG.DE and Mercedes DAIGn.DE as well as several Formula 1 teams, has taken a small "long-term" stake in tire maker Pirelli PIRC.MI.

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Brembo said on Tuesday it had decided to buy the 2.43% stake, held both directly and indirectly through its Nuova FourB parent company, with “a non-speculative, long-term approach” and it had made the move “autonomously”.

Shares in Pirelli, which was not immediately reachable for comment, are trading close to their lowest level since the tiremaker went public again in 2017, two years after a delisting that followed a takeover by ChemChina.

A source close to the matter said Brembo bought the stake without informing Pirelli, whose shares are down by around 40% so far this year, or its shareholders.

Pirelli, whose tires are used by Formula One racing teams and automakers such as BMW and Audi has repositioned itself to serve the premium market segment, which is also Brembo’s focus.

Marco Tronchetti Provera, Pirelli’s chief executive, said Brembo’s arrival as a shareholder at time of depressed market valuations confirmed the tiremaking firm had done a good job in recent years, as well as its solidity.

“But the course of Pirelli’s business will continue unchanged,” he said.

INVESTOR PACT

Brembo’s Executive Deputy Chairman Matteo Tiraboschi last year said the brake maker, which has a market capitalization of around 2.25 billion euros, was eyeing an acquisition target of “significant size”, even as big as Brembo itself.

It approved a loyalty share scheme that allows its family owners to retain control, even if their stake falls below 50% after an acquisition.

Tiraboschi said in October that Brembo was looking at the auto sector for the acquisitions, as it aimed to complete the range of products it offered, while remaining “consistent” with what it was doing already.

Tiraboschi, however, never gave precise details about what regions Brembo was looking at for its M&A plans.

With a market capitalization of 3.3 billion euros, Pirelli is controlled by ChemChina and Silk Road Fund, jointly holding about 45.5%, and Italy’s Camfin, which holds about 10%.

Pirelli’s top investors last year extended a shareholder agreement until 2023 and this month said they would raise their stakes by up to 1.5% each.

Reporting by Giulio Piovaccari and Valentina Za, Editing by Giulia Segreti and Alexander Smith

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