State-owned company China National Chemical (ChemChina) is to buy Italian tyre maker Pirelli in a deal which values the firm at €7.1bn.
While the deal gives ChemChina access to technology to make premium tyres, it gives Pirelli greater access to the Chinese market.
The news pushed Pirelli shares 2.56% higher at €15.62 on Monday.
ChemChina's tyre making unit, China National Tire & Rubber, is to buy the 26.2% stake in Pirelli owned by Italian investment firm Camfin. It will then do an offer for the remaining shares.
As Camfin said, the bid would be launched by a consortium controlled by ChemChina but also part-owned by Camfin investors, who include Pirelli boss Marco Tronchetti Provera, Italian banks UniCredit and Intesa Sanpaolo, and Russia's Rosneft.
The offer will value the group at €7.1bn excluding net debt of almost €1bn, with €15 per share.
Following reports of the deal on Friday, shares in Milan-listed Pirelli hit a 25-year high, closing at €15.23.
Current Pirelli CEO Tronchetti Provera, who started working for tyre maker in 1986 after marrying a member of the Italian family that founded the firm, will remain in his post.
This move is the latest in a series of takeovers in Italy by the cash-rich Chinese. Previous acquisitions of China in Italy include stakes in power grid firms Terna and Snam, turbine maker Ansaldo and luxury yacht maker Ferretti.
