(Bloomberg) -- Sinochem Holdings Corp. is considering selling its 37% stake in Italian tiremaker Pirelli & C. SpA as the Chinese state-owned conglomerate seeks to streamline its global portfolio of assets, according to people familiar with the matter.

The Beijing-based oil-to-chemicals group is in the early stages of reviewing its holding in Pirelli, the people said. Prospective buyers including private equity firms have shown preliminary interest in the iconic Milan-based firm, the people said, asking not to be identified as the information is private. Sinochem may also sell a partial stake or divest over time on the market, the people said. 

Chinese state-owned enterprises including Sinochem are under government instructions to review their assets and ditch those outside their core businesses. The drive could see companies unwind years worth of big-ticket overseas acquisitions like Pirelli, bought for about $8 billion in 2015.

Pirelli shares fell as much as 4.3% in Milan trading.

Relatively high financing costs for buyers in recent months, as well as Pirelli’s debt load, would be hurdles to any potential deal, the people said. The firm had a negative net financial position of €3.4 billion ($3.6 billion) as of Sept. 30, 2022, according to its interim report. 

Any change of control of Pirelli could trigger a mandatory takeover bid for the company, which is listed in Milan. The tiremaker’s shares have fallen about 20% in the past 12 months, giving the company a market value of about €4.8 billion. 

Previous considerations didn’t lead to a sale and Sinochem could decide to retain Pirelli for longer, the people said. A representative for Sinochem’s press office said they are not aware of news that the company will sell its stake in Pirelli, and referred to the Italian firm’s exchange filings for any related information.

Sinochem Holdings was formed after the merger of Sinochem Group and China National Chemical Corp. almost two years ago. Its businesses span agrochemicals and animal nutrition as well as petrochemicals and machinery, environmental science and finance, according to its website. In addition to Pirelli, its rubber and tire assets also include Shanghai-listed Aeolus Tyre Co.

Led by Chief Executive Officer Marco Tronchetti Provera, Pirelli makes tires for high-end automotive brands including Ferrari NV, McLaren Automotive Ltd. and Bentley Motors Ltd. Provera is its second largest shareholder with 14.1%, while Chinese state-backed investor Silk Road Fund Co. controls 9%, its 2021 annual report shows.

Li Fanrong, Sinochem’s chairman, also chairs the board of Pirelli. Provera’s Camfin SpA investment vehicle has a shareholder pact with Sinochem and other Pirelli investors that among other things sets the governance of the company.

Pirelli is scheduled to report full-year results for 2022 on Feb. 22.

--With assistance from Sarah Chen and Albertina Torsoli.

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