UPDATE 1-Yacht maker Ferretti cruising for China middle market

Tue Nov 6, 2012 1:44pm EST

* Considering Chinese brand acquisition in 12-18 months

* Eyeing IPO in Asia stock market in 3-4 years

* Shandong Heavy owns 75 pct of Ferretti

By Antonella Ciancio

MILAN, Nov 6 (Reuters) - Ferretti, the Italian luxury yacht maker favoured by Chinese tycoon Li Ka-shing and Italy's Fiat-owning Agnelli dynasty, may expand into smaller boat building in China to meet growing demand from the country's newly-affluent middle classes.

The group, controlled by China's state-owned Shandong Heavy Industry Group, is looking to add 6-8 metre pleasure boats to its range of customer-designed mega-yachts popular with the world's super-rich.

Ferretti would manage production of the boats following the acquisition of a Chinese brand over the next 12-18 months, Chief Executive Ferruccio Rossi told Reuters in an interview.

"With our know-how and support by our majority shareholder we are considering entering the so-called recreational segment and make smaller boats for the Chinese middle class through a local brand and a local manufacturing plant," he said at the launch of Ferretti's first megayacht under the smaller-sized and glamorous Riva brand.

Ferretti, taken over by Shandong Heavy in a 374 million-euro deal in January, owns eight brands including Ferretti Yachts, Pershing, Itama and Bertram.

IPO CONSIDERED

Rossi said the group was also considering an initial share offering in Asia on the heels of Italian fashion group Prada's IPO last year, Rossi said.

"Maybe in three to four years we could list on an Asian market to gain further visibility," Rossi said. "I very much like the experience of Prada and we are looking at it closely."

"There could be a dual listing but it's premature to think about this now."

Ferretti, which competes with smaller Italian peer Azimut Benetti, floated on the Milan stock exchange in 2000 following a string of acquisitions and delisted two years later.

It has said it would keep jobs and manufacturing in Italy, which has long dominated the yachting industry.

But a protracted recession and a fiscal clampdown have hurt domestic sales of luxury goods, Rossi said, and the company has temporarily laid off workers at one of its Italian yards.

The global yacht market is expected to grow by 2 percent in 2012 from 5 percent last year, luxury body Altagamma said.

Rossi said Ferretti would continue to produce in Italy, where it aims to break even in the second half of 2013.

CHINESE HOLDINGS

Shandong Heavy Industry Group controls four groups with stock listings in Hong Kong, Shanghai or Shenzhen: Weichai Power , Weichai Heavy Machinery, Yaxing Motor Coach Company and Shantui Construction Machinery.

It plans to invest nearly 200 million euros in Ferretti, after an initial equity investment of 178 million euros for a 75 percent stake and 196 million euros of debt financing.

Former creditors Royal Bank of Scotland and hedge fund Strategic Value Partners own the remaining 25 percent.

Ferretti is not alone in finding itself owned by investors from emerging markets taking advantage of Europe's financial woes to pick up brands and establish themselves as global players.

Private equity fund Permira, a former shareholder in Ferretti, sold fashion house Valentino to the Qatari royal family for around 700 million euros in July.

Ferretti makes around half of its sales in Europe, 15 percent in Asia-Pacific, and 35 percent in the Americas.

The company aims to make one third of revenues in each region by 2018.

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For a Reuters Breakingviews commentary on the Ferretti takeover, click on:

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