SHIG-Weichai Group, a construction, power and commercial vehicle construction company based in China’s eastern Shandong Province has signed an agreement with the Ferretti Group to acquire a 75 per cent controlling interest in the Italian superyacht company, including its trademarks, shipyards and sales networks. Ferretti will retain it’s key management team, headquarters and production bases in Italy.

SHIG-Weichai will pay €374 million ($292.7 million), including an equity investment of €178 million and the provision of debt financing for the stake in Ferretti Group. Existing creditors, The Royal Bank of Scotland Group Plc and Strategic Value Partners LLC will each take half of the remaining 25 per cent, or 12.5 per cent each in the deal.

Ferretti’s capital structure will be fully restructured with an equity capital increase of €100 million and a reduction of debt to €120 million, “a reasonable level” according to a Group statement.

“Developing the yacht business is one of the Group’s strategic goals for the next five years,” Tan Xuguang, Chairman of SHIG-Weichai Group, said. “Ferretti, which possesses iconic international brands, state-of-the-art manufacturing technologies, products of the highest quality and an extensive sales network, is an ideal partner. Through the acquisition, the Group will cooperate closely with this world-renowned yacht maker, providing Ferretti with new channels to market and capital support as well as other resources with which it can expand more effectively into emerging markets, a key area of potential growth for Ferretti. Synergies between the Group and Ferretti can be unleashed through the sharing of resources and industrial integration. Ferretti’s overall competitive advantages in production cost, sales channels, after-sales service and financial strength will be improved, creating a win-win situation that will allow Ferretti to consolidate its leading position in the luxury yacht market”.

“We are very proud of this agreement with a prestigious partner such as SHIG—Weichai Group,”Norberto Ferretti, Chairman and Founder of Ferretti Group said. “We are strongly convinced that this partnership will lead to very satisfactory results and will provide Ferretti Group with a strong capital base which will allow the development of long-term growth plans. Moreover China is one of the most rapidly developing countries for the yachting sector and has great potential for the coming 5 to 10 years”.

It’s a dramatic next step for Ferretti, whose management has been intently focused on acquiring new investment after having previous debt-for-equity agreements with Mediobanca, Candover and Permira and, most recently, the Royal Bank of Scotland. It is also a dynamic new scenario for the Italian superyacht marketplace, which along with much of the rest of the Italian economy, is working hard to cut costs and raise capital. This investment from China will no doubt be scrutinised within the yachting press and mainstream media as both a remarkable opportunity for a prestigious Italian luxury brand to regain strength and grow overseas, and as a concerning development for the pride of Italian domestic manufacturers.

For its part, SHIG has identified the yachting market as an area into which it will diversify, and has been engaged in negotiations with Ferretti for over a year. In July 2011, SHIG signed a non-binding memorandum of understanding for "an industrial partnership for the design, production and sale of motoryachts for the market of Greater China (China, Hong Kong, Taiwan and Macao) and other emerging markets," according to a Ferretti press release at the time.  

From left to right: Jason Clarke of Strategic Value Partners; Norberto Ferretti, President of Ferretti Group; Tan Xuguang, President of SHIG-Weichai Group; John Davison, Global Head of Strategic Investment at RBS.

According to the Chinese business paper Sina Finance, with China’s automotive sector finally showing signs of slowing down, SHIG, which also owns and operates Shandong Automobile Industry Group Co., Ltd. has stated it will focus its growth on diversification of its interests in power systems, commercial vehicles, construction machinery, auto parts and yacht manufacturing. In the first three quarters of this year, SHIG’s automotive division had an operating income of 47.18 billion yuan, an increase of 0.6 per cent with a net profit of 4.58 billion yuan, down 4.6 per cent for the previous year. SHIG’s third-quarter operating income of about 10.55 billion yuan, was down 22.9 per cent from the same quarter a year earlier.

Sina Finance has speculated that Weichai could continue its diversification into European and Western manufacturing and technology with a targeted acquisition of a high-power diesel engine manufacturer.

Related Links

SHIG-Weichai Website

Ferretti Group Website

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