Jan. 10 (Bloomberg) -- Ferretti Group was sold to thestate-owned parent of China’s biggest bulldozer-maker, puttingthe Communist nation in control of the world’s largest luxury-yacht builder.
Creditors will sell 75 percent of Ferretti for 178 millioneuros ($228 million) to Shandong Heavy Industry Group-WeichaiGroup, according to a statement handed to reporters today inJinan, China. Royal Bank of Scotland Group Plc and StrategicValue Partners LLC will also own 12.5 percent stakes in theForli, Italy-based boatmaker.
State-controlled Shandong Heavy plans to add superyachts toits construction and farming products after surging economicgrowth boosted China’s number of millionaire households 31percent in 2010. The deal may help Ferretti, whose Riva unitmade boats for Brigitte Bardot and Sean Connery, to expand inthe world’s most-populous nation after a slump in salesfollowing the 2008 financial crisis left it near bankruptcy.
“China’s super-rich are looking at yachts and jets becausethe country has so much money now,” said Richard Tai, luxury-goods analyst at Shanghai-based research firm China Research &Intelligence. “It just shows China’s phenomenal economicdevelopment over the past 30 years.”
Ferretti, which also makes Ferretti, Pershing and Betramyachts, will retain its existing management as well as itsheadquarters and production facilities in Italy, according to astatement.
Olympic Regatta
The deal, which still requires approval from Italianregulators, will take three to six months to complete, TanXuguang, Shandong Heavy’s chairman, told reporters today.Shandong province, which controls the company, contains the cityof Qingdao, a major naval base and host of the 2008 Olympicsailing regatta.
Ferretti will get 198 million euros of debt-financing fromShandong Heavy, whose units include bulldozer-maker ShantuiConstruction Machinery Co. and Hong Kong-listed engine-makerWeichai Power Co. The deal also includes 100 million euros ofnew equity and a reduction in Ferretti’s debt to about 100million euros.
The yachtmaker may be listed in Hong Kong within five yearsof the deal, said Tan. Ferretti sold about 17 vessels in Chinalast year, he said. The country had about 1.11 millionmillionaire households in 2010, according to Boston ConsultingGroup. “Ferretti is a high-end brand and Chinese consumers havenot yet evolved to such high-end consumption,” Tan said. “Overthe next five to ten years there will be great potential foryachts in china.”
China Yacht Demand
While there were as many as 400 dollar billionaires inChina, the country only had about 100 Chinese-owned yachtslonger than 60 feet as of May, according to Rupert Hoogewerf,who compiles the Hurun Report of wealthy Chinese. There weremore than 7,000 yachts that size in the U.S. in 2006.
The potential demand has lured overseas boat-builders suchas Azimut Yachts, Sunseeker International Ltd. and BrunswickCorp. Domestic companies have also begun building superyachtsincluding Xiamen Hangsheng Yacht Building Co.
Lamborghini, Coach
Luxury-goods makers are targeting China as growth of lessthan 2 percent in Europe and the U.S. stifles demand in theirtraditional markets. Supercar-maker Automobili Lamborghini SpAexpected to sell more vehicles in China than in the U.S. for thefirst time last year. Coach Inc., the biggest maker of luxuryhandbags in the U.S., has predicted that China will surpassJapan as its biggest overseas market within a few years.
Ferretti ceded control to lenders in 2009 when it missed aloan payment on debt used to finance its leveraged buyout. Itwent from planning an initial public offering in 2008 toreorganizing its debt in a matter of months as it customer basecollapsed in the credit crisis.
In the 2009 debt-restructuring, a group of 100 creditorsled by RBS agreed to convert some of their 1.2 billion euros ofdebt to equity to avert a Ferretti bankruptcy. CandoverInvestments Plc, which bought the yachtmaker for 1.5 billioneuros in a 2007 leveraged buyout, ceded its stake in the deal.
