The "Rolls-Royce of yachting" on the verge of bankruptcy was saved by a Shandong man who built diesel engines

Article | Financial Gossip Female Author: Huang Muxiao

The minds of Russia’s super-rich must be buzzing these days. European and American countries have successively targeted Russian wealthy people, restricting their personal freedoms and confiscating their property. A large yacht worth 5.6 billion US dollars was directly taken away and "confiscated". We can’t get involved in the rich’s affairs, but it’s really nice to look at the rich’s yacht. The "2022 Global Superyacht Order Report" shows that there are 1,024 global superyacht projects under construction or on order in 2021, a year-on-year increase of 24.7%, and the order volume has broken the historical record set in 2009. In the past two years, factors such as the epidemic, stock market turbulence, and local geopolitical wars have been combined. I thought that the rich should be "prepared for danger" with their money, but unexpectedly, they have worked hard to "create" it. As for the reason, Alberto Galassi, CEO of Italian yacht manufacturer Ferretti, said: "The epidemic has made people realize how fragile life is. For those who can afford it, postponement is no longer an option." The rich are drunk now, and the yacht industry will naturally benefit. According to the Hong Kong Stock Exchange’s disclosure on March 13, Italian luxury yacht manufacturer Ferretti S.p.A. passed the listing hearing of the Hong Kong Stock Exchange, with CICC as the exclusive sponsor.

Picture source/Weibo@Italian Ferretti Group

Who would have thought that this old Italian ultra-luxury brand was on the verge of bankruptcy more than ten years ago, and a Chinese man could Against all odds, we acquired this company and built it into the success it is today. Why was Ferretti successful in the hands of the Chinese?

How did the luxury ceiling come to China?

No matter how rich you are, it is enough to choose Ferretti when buying a yacht. As a luxury product, Ferretti's advertisement once read: Buy a Ferretti and get a Ferrari as a gift. Yachts have always been considered one of the important symbols of the leisurely and luxurious life of the rich. Take domestic wealthy people as an example. Jack Ma was once exposed by foreign media to owning a yacht in Spain. Boss Xu owns a boat named "Evergrande No. 1". During the years when his fortune was at its peak, he often entertained business partners, coaches and players of the Guangzhou Evergrande Club to enjoy the beautiful scenery of the Pearl River.

The richest man, Wang, was even more generous. He bought three ships and named them "Wanda No. 1", "Wanda No. 2" and "Wanda No. 3" respectively. The total value is several hundred million, and the interior decoration is luxurious. It often appears in the social circle of Wang Sicong or his friends.

Although Zhang Chaoyang of Sohu is not what he used to be, he is one of the pioneers of domestic wealthy people playing yachts. He has a yacht called "Happiness".

Ferretti’s yachts are loved by many wealthy people around the world. Its subsidiary RIVA is the world's leading luxury yacht brand with a history of 180 years. It is also one of the oldest, most legendary and most expensive brands in the world of yachts. It is recognized as the "Rolls-Royce" of yachts. ". Due to Riva yachts' uncompromising high quality and superior craftsmanship and materials, she has become the favorite of royalty, big stars, and business giants. The King of Spain, Prince Charles of the United Kingdom, Greek shipping magnate Onassis, Li Ka-shing, Elizabeth Taylor, George Clooney, Brad Pitt... are all her loyal users.

Riva Yachts/Photo source @Italian Ferretti Group

How does such a luxury ceiling have anything to do with the Chinese? Let’s start with a crisis in this company.

Ferretti S.p.A. is one of the oldest luxury yacht manufacturers in Italy. It has nothing to do with Boss Jia’s Faraday Future, nor does it have anything to do with the Italian sports car brand Ferrari (both an Italian surname, such as Lao Wang and Lao Wang). In 1968, two Italian brothers, Norberto Ferretti and Alessandro Ferretti, started out as agents for American yacht brands, and later jointly founded the Ferretti Group. How can the proud Italians always sell American brands? Besides, shipbuilding is more profitable than selling ships. In 1971, the group began planning to build a shipyard. After more than twenty years of hard work, Ferretti has built rowing boats that stand out from the crowd and often win rowing championships. Then, with the help of funds from institutional investors, they began to make aggressive acquisitions.

From 1996 to 2004, it acquired 6 yacht brands and multiple shipyards. By 2008, it had 2,000 employees and 9 production bases around the world. It has seven major brands - Riva, Wally, Ferretti Yachts (Ferretti Yachts), Pershing, Itama, CRN and Custom Line. Each brand is the leader in its market segment.

Ferretti Group Brand Portfolio Picture Source/Prospectus

Monthly profit or loss. When the financial crisis broke out in 2008, the yacht industry entered a contraction cycle, and the acquired companies began to lose money. Ferretti's own operations also faced the dilemma of reduced revenue and declining profits.

In 2009, Ferretti was forced to undergo debt restructuring, but the effect was not good, and sales revenue continued to plummet. Seeing that the debt is due and the money is no longer paid, the company may be broken up and sold by the creditors. Norberto Ferretti, the 70-year-old founder of Ferretti at the time, went out to find funds, hoping that the brand he had worked so hard to create could continue. At this time, a Chinese man "stepping on colorful auspicious clouds" appeared. He is Tan Xuguang, chairman of Weichai Group. Weichai is an international multinational group (state-owned enterprise) with various business sectors including power systems, automotive business, and construction machinery around the world, and has 7 listed companies under it.

A twists and turns of acquisition

The idea of ??acquiring Ferretti originated from a cooperation between Tan Xuguang and a French company. In 2009, Weichai acquired the French Baudouin Marine Engine Company. Tan Xuguang discovered that most of the engines they manufactured were installed on yachts, so he decided to enter the downstream yacht industry. Coincidentally, in 2010, China proposed the "Blue Ocean" development strategy and acquired a yacht company to serve the marine economy. The pattern and benefits suddenly increased. He wanted to sell and buy at the same time. It was a business that could be negotiated, but Tan Xuguang encountered obstacles. At the 2010 shareholders' meeting, Tan Xuguang proposed the acquisition of Ferretti. He told shareholders: "This is an opportunity to buy the world's largest luxury yacht manufacturing group at the bottom, and it is also a transformation of Weichai from the investment field to the consumer market." The shareholders responded very much. Indifferent, 21 of the 23 shareholders present voted against it. Tan Xuguang feels that the acquisition of Ferretti is a good thing: firstly, he can use Ferretti Yachts' popularity and complete sales channels to pave the way for Weichai to enter the consumer market; secondly, the yacht's engine is a heavy-duty engine, which is similar to Weichai's business has a high degree of matching and can complete Weichai's layout in high-end engines. In June 2011, Tan Xuguang took shareholders to visit several Ferretti factories. The shareholders seemed to realize the joy of luxury brands and quickly approved the acquisition plan.

Tan Xuguang/Photo source: Baidu Encyclopedia

During this period, the CEO of Ferretti suddenly died of a heart attack. The two parties had already gone through three rounds of agreements and had to postpone it. Tan Xuguang discovered at this time that Ferretti’s debt was extremely complicated. The group had failed to restructure its debt twice. In fact, the company had been placed under trusteeship by creditors such as Royal Bank of Scotland (RBS), Oaktree Capital and Bank of Italy. In this way, one-on-one negotiations become one-on-three. Royal Bank of Scotland (RBS), Oaktree Capital and Bank of Italy are all millennium foxes in the capital market. During the negotiation process, they took note of Tan Xuguang's anxious attitude and either asked for high prices or rambled on. The Royal Bank of Scotland was trying to do both, and was negotiating with other fund companies at the same time, but was tricked by its opponents. Seeing that they were not sincere, Tan Xuguang could only wait. Fortunately, the balance of time is in Tan Xuguang's favor. If Ferretti's debts are not paid when they are due, it will face bankruptcy and liquidation. It is hard to say how much creditors and shareholders will get back by then. At the end of 2011, Tan Xuguang invited negotiators from Royal Bank of Scotland (RBS), Oaktree Capital and Bank of Italy to Hong Kong and arranged them to different hotels. None of the three parties knew that the other two parties had arrived in Hong Kong. After seven days of separate discussions, the creditors, Ferretti Group and Weichai Group finally signed a framework agreement: Weichai Group invested a total of 374 million in Ferretti through an equity investment of 178 million euros and a bond investment of 196 million euros. Euro, holding 75% of Ferretti's shares. In the agreement, Tan Xuguang also retained a hand. The remaining 25% equity was obtained by creditors through a debt-for-equity swap plus 25 million euros. On the one hand, it prevents them from taking money and running away, and at the same time, it avoids the unknown risks of acquiring companies. After all, no one wants to use their own money to plug holes.

In this way, Tan Xuguang took an old yacht company into Chinese hands.

How many more Ferretti cars will you buy before retiring? /

According to the latest news, Ferretti will launch the listing process in Hong Kong on March 21. The stock is expected to start trading at the end of March and plans to sell 25% of the shares with a target valuation of 1 billion. Dollar. This is not the first time Ferretti has been on the market. Ferretti was launched in 2000. In 2003, after Primera, a private equity investment company, fully acquired the Ferretti Group for 698 million euros, Ferretti announced its privatization and delisting. Primera withdrew in 2007, and Ferretti struggled to support it for several years. Finally, in 2012, Weichai acquired 75% of the shares for 350 million euros, which was later increased to 86%. Tan Xuguang's bargain hunting this time is considered to be on the floor, and the market value has tripled in ten years. After coaching changes, reforms, and integration, in just 4 years, Ferretti turned a full profit from losses in 2016, with a net profit of more than 14 million yuan. According to the prospectus, in the 10 years since the merger and acquisition, Ferretti’s revenue has grown from less than 300 million euros at the time to as of 2018, 2019, 2020 and September 30, 2021. Ferretti has achieved excellent financial performance during the operation period. Revenues were approximately 631 million euros, 678 million euros, 638 million euros, and 693 million euros respectively. Industry data is also good for Ferretti. According to Chishi Consulting data, looking at the global wealthy population data, the global ultra-high net worth individuals and extremely high net worth individuals are 6.8 million and 200,000 respectively. Among them, the Asia-Pacific region is expected to reach approximately 3.5 million ultra-high net worth individuals and 100,000 ultra-high net worth individuals in 2025, with compound annual growth rates of 10.8% and 11.6% respectively. In other words, Ferretti’s potential customers and target customers continue to increase. Of course, Tan Xuguang may not take the US$1 billion company seriously, as the company he participated in the acquisition is considered the smallest. In 1977, 16-year-old Tan Xuguang became a product laboratory technician at Weifang Diesel Engine Factory. He started from the bottom. Due to his outstanding performance, he led Weichai to acquire the "Xiang Torch" of Yangchai and Delong, and also joined forces with Shandong Engineering Machinery Group and Shandong Automobile Group to form Shandong Heavy Industry Group. Tan Xuguang's positions have also gone from director of Weifang Diesel Engine Factory to chairman of Weichai Holding Group, chairman of Shandong Heavy Industry Group, and chairman of China National Heavy Duty Truck.

Tan Xuguang also sets his sights overseas.

In 2009, Weichai acquired the French company Baudouin, filling the gap in high-power ship engines above 15 liters.

In 2012, Weichai acquired Ferretti Group, broadening the downstream market for high-power engines.

In 2012, Weichai strategically reorganized the German Kion Group. This company controls the world's highest-performance hydraulic technology, filling China's gap in this area. In addition, its forklift business leads the world.

In fact, Weichai was originally a subsidiary of China National Heavy Duty Truck. The two sides had disharmony in terms of business and leadership cooperation, and they had arguments and quarrels. In December 2005, Weichai announced that it would stop supplying to China National Heavy Duty Truck. Three months later, the Shandong Provincial State-owned Assets Supervision and Administration Commission separated the property rights of the two companies.

Later, Weichai developed better and better, and even formed Shandong Heavy Industry. In 2019, Jinan State-owned Assets Supervision and Administration Commission transferred 45% of its shares in Sinotruk Group to Shandong Heavy Industry for free; Shandong State Investment Corporation entrusted its 20% shareholding in Sinotruk Group to Shandong with other shareholder rights except asset income rights. Heavy industrial exercise.

After this free transfer and this equity entrustment, Shandong Heavy Industry obtained and controlled 64.55% of the company’s equity interests through the National Heavy Duty Truck Group, and Tan Xuguang became the Party Secretary and Chairman of China National Heavy Duty Truck.

Although it is nominally a reorganization of two group companies, it is already clear who is the BOSS.

In 2020, Shandong Heavy Industry Group's total operating income reached 500 billion yuan, making it the only enterprise in Shandong to reach this scale. Because it is a state-owned enterprise, it cannot be called a "business empire", but the enterprises under Tan Xuguang's rule are large enough.

Tan Xuguang lamented in an interview: "In the past ten years, this section of the road has been the most risky, combining various factors. There will be no other person in China who can do such a thing."

In the past two years, Haier’s 72-year-old Zhang Ruimin retired, and Hisense’s 65-year-old Zhou Houjian retired.

Tan Xuguang will retire in February 2021. He responded positively: "I am not considering retirement at the moment. I will continue to serve the company well and create value for all shareholders."

He can also contribute to It remains to be seen how many Ferretti cars the Chinese companies will “dig”.

Reference articles

1. "Weichai Group Tan Xuguang: Focus on the main business and make selling engines more profitable than real estate!" ", Qilu Entrepreneur Rican;

2. "The inside story of Weichai's bargain hunting of the world's largest luxury yacht company: "Tan Boldly" made his negotiating opponents cry", Economic Observer;

3. "Shandong boss, engaged in the yacht business of the world's royal family and the richest man, is about to receive an IPO", Chuangye.com.