Ferretti navigates choppy markets to launch €890mn Hong Kong IPO

Two-and-a-half years ago, Italian yachtmaker Ferretti shelved its planned Milan listing at the last minute. It is now going public in Hong Kong — a nod to its main shareholder, China’s state-controlled Weichai Group and the region’s increasingly wealthy population.

The HK$22.88, or €2.66, per share price is at the low end of the range cited in the listing prospectus, which valued Ferretti at up to €1.2bn. But it is significantly higher than the €581mn, or €2 per share, the company would have listed for at the end of 2019. Yet the timing seems incongruous with super yachts coming under scrutiny as a prized asset for Russian oligarchs.

“I am exhausted but very happy. It hasn’t been all smooth sailing, especially given the geopolitical context, but the outcome is above our expectations,” Ferretti chief executive Alberto Galassi told the Financial Times.

The initial public offering, which values the company at 10 times ebitda, or €890mn, is the first major listing of a European group since Russia’s invasion of Ukraine broke out last month. Following its stock market debut on Wednesday the free float will be 25 per cent.

Despite geopolitical headwinds and continuing restrictions related to Covid-19, particularly in Asia, Galassi, who is credited with turning round the group since taking the helm in 2014, said listing could no longer be put off. Ferretti is targeting substantial growth through investments aimed at expanding its range, increasing yacht dimensions and strengthening its aftersales services such as chartering and refitting.

“Our shareholders were extremely [confident], then we also realised the war in Ukraine is seen as further away by investors in the Asia-Pacific region, who were more comfortable to invest at this stage,” Galassi said. Asian cornerstone investors make up roughly 70 per cent of the total of the IPO.

Ferretti owns iconic brands such as Riva, Wally and Pershing, with customers including former England footballer David Beckham. It operates six shipyards across Italy and is a market leader for yachts measuring 25 metres with prices ranging from €4mn-€20mn.

The company has been controlled by Weichai since 2012, which owns an 86 per cent stake. An 11 per cent holding was bought in 2016 by Piero Ferrari, the heir of the family that founded the eponymous luxury car marque.

“We know the IPO market is dead right now and that Ferretti is worth more than the IPO value, but we’d rather list below peak and be confident investors will make a profit by the end of the lock-in period,” Galassi said.

“We represent the crown jewels in this difficult context and investors were clever enough to notice.”

Galassi said Hong Kong is a market where Made in Italy and luxury are highly valued. Milan-based fashion house Prada listed there in 2011. “What you need is the infrastructure, ports, marinas . . . But the Chinese government is investing a lot of money in these assets,” he said.

The chief executive is unable to attend the listing ceremony at the Hong Kong exchange because of Covid restrictions. “But paradoxically,” he noted, “the pandemic spurred our sales, as an increasing number of super-rich clients realised a yacht gives you the freedom that has been taken away by the Covid restrictions.”

Ferretti is working on orders worth more than €1.2bn after slashing its debt from €265mn in 2018 to €93mn in net cash in 2021. Over the same period revenues grew from €615mn to €898mn last year.

While Ferretti and the broader yacht industry have shrugged off the pandemic, concern over the longer-term impact of the conflict in Ukraine is mounting.

“This war will have serious long-term impacts for Europe because of its trade ties to Russia and its energy dependency,” said Galassi, who also criticised the EU’s ban on luxury exports to Russia worth more than €300mn.

Only 3 per cent of Ferretti group revenues will be lost because of the impact of sanctions. And mega yachts, favoured by Russian oligarchs, represent less than a tenth of the group’s sales.

“Sanctions will hurt Russia but they will end up hurting Europe too,” Galassi said. “Businesses want peace. The sooner this war ends the better; some Made in Italy sectors will be devastated.”