The two main shareholders of Pirelli, Camfin and China's Sinochem, are prepared to let their shareholder agreement expire, a move that will trigger fresh intervention from the Italian government over the group's governance. Two sources close to the situation confirmed the development. The decision not to renew the pact comes as the government weighs options to limit Sinochem's influence over Pirelli, or even turn it into a passive shareholder, as part of efforts to facilitate the tire maker's expansion in the United States. Sinochem, controlled by Beijing, is Pirelli's largest shareholder with 34.1%, while Camfin—the vehicle of businessman Marco Tronchetti Provera—holds a 25.3% stake and plans to increase it to 29.9%. SHAREHOLDER BATTLE OVER GOVERNANCE Although bound by their mutual agreement, the parties have clashed for years over Pirelli's governance. Camfin and Pirelli itself complain that having a Chinese company as the main shareholder is a barrier to the group's expansion in the United States, given that Washington has tightened restrictions on the use of Chinese technology in the automotive sector. Industry Minister Adolfo Urso has voiced similar concerns. The current agreement expires on May 19, a little over a month before Pirelli's general meeting is set to vote on a new board of directors. Neither Camfin nor Sinochem intend to propose an extension of the agreement and are expected to formally notify the government, the two sources told Reuters, requesting anonymity. Camfin and Sinochem declined to comment. GOLDEN POWER TO PROTECT STRATEGIC ASSETS Rome first intervened in 2023 to set limits on Sinochem and preserve Pirelli's autonomy, under the so-called 'golden power' law designed to protect the national interest. Under terms set by the government, Pirelli's Italian shareholder has the right to appoint the company's CEO and make strategic decisions, while Sinochem is expected to refrain from exerting managerial influence over the company. The government also stipulated that the parties must notify the cabinet of any changes to their shareholder agreement, including the decision not to renew it. The expiry of the agreement will prompt Rome to launch a new review of the 'golden power' rules to determine the next governance structure for Pirelli and help the group safeguard its ability to compete in the U.S. market, the sources added. Although sources told Reuters in January that the Italian government could freeze Sinochem's voting rights in Pirelli, Rome is still working to help the parties reach a more amicable agreement, according to the sources. Options on the table include the sale of Sinochem's stake in Pirelli, one of the sources said. Last year, Reuters reported that the Chinese state group could consider selling its stake if a premium offer emerged. Sinochem has appointed BNP Paribas as adviser on a possible sale, a source previously told Reuters. (Translated by Enrico Sciacovelli, editing by Sabina Suzzi)