State-Owned Group Buys Majority Stake In Italian Yachtmaker
In many ways echoing the Wantong Group’s acquisition of the Italian luxury yachtmaker Dalla Pieta for US$111.3 million in 2009, this week it was announced that the state-owned Shandong Heavy Industry Group-Weichai Group plans to purchase a majority stake in Italy’s Ferretti for $479 million. Like a number of other acquisitions of European brands by Chinese groups since the global financial crisis of 2008-2009, the New York Times writes that this deal indicates that Chinese companies see weakness in European economies as a chance to buy shortcuts to global success:
“China is one of the most rapidly developing countries for the yachting sector and has great potential,” the companies said in a joint statement released at a signing ceremony in the eastern Chinese city of Jinan.
The Ferretti Group chairman, Norberto Ferretti, said the deal would help his company tap the global yacht market, estimated at €7 billion, or $9 billion, “and meet growing Chinese demand for luxury goods for the coming five to 10 years.”
Ferretti’s key management team, headquarters and production bases will remain in Italy, the companies said. Shandong Heavy said it plans to build yachts in China for the domestic market.
“China offers an opportunity to our companies, especially when our economy is not going well,” the head of the Italian marine industry association UCINA, Anton Francesco Albertoni, told Reuters.
Italy has long dominated the yachting industry, which contributes €3.36 billion to the country’s economy annually.
“Chinese are learning fast and well,” Mr. Albertoni said. “They love their marinas and golf clubs.”
A growing number of shipyards has been built in China, where yacht imports increased threefold from 2009 to 2010.
“The opening of new marinas, yachting facilities and yachting events in China, especially on the southern coast, is actually fueling demand for yachts,” said Olivier Burlot, managing director of the Hong Kong-based international yacht brokerage Simpson Marine.
Though the purchase of a brand with the heritage and reputation of Ferretti — and for so cheap — is obviously a coup for the Shandong Group, whether it will actually spur the industry in China is questionable. While new marinas and resorts dot the coastline in China, Chinese millionaires look to buy “toys” like airplanes and yachts, and yachtmakers from around the world continue to crowd into Hainan island, it will likely take years before the Chinese yacht industry truly heats up. Much of this comes down to the fact that the majority of new wealth being created in the country is now not among residents of the coastal southeast, where weekend yachting would be easily accessible, but in landlocked inland areas like Shanxi province and Inner Mongolia. Though this wealth creation has been a boon for ultra-luxury automakers like Bentley and Rolls-Royce, it’s certainly more difficult to tap for yachtmakers, who are focused on courting the country’s relative “old money” in Guangdong province, Shanghai and Beijing.Still, it appears that Chinese companies looking to get involved in the yacht industry are taking a long view — acquiring legacy brands while EU economies are relatively weak, setting up their own factories, and hedging their bets that stiff luxury taxes will diminish the threat from foreign competitors for years to come. As Jing Daily wrote last summer:
Though yacht builders are rightfully optimistic about the Chinese market, with its hundreds of thousands of free-spending millionaires and expanding nouveau riche, the Chinese yacht market is no easy bet. Like the private aviation industry, which is dogged by opaque regulations and red tape and, as a result, is leading to a cottage industry in illegal “black flights,” yachting in China suffers from uneven regulation which differs from province to province, inadequate sailing infrastructure, inexperienced service and maintenance staff, and high import taxes.
While these setbacks are largely due to the fact that China’s private boating industry is very much in its infancy, they are slowing the speed at which major international yacht makers are able to expand in this lucrative market. (And providing an opportunity for home-grown Chinese yacht producers.)