Ferretti Group SpA

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Ferretti Group SpA

Via Ansaldo, 5/7
Forli, I-47000
Italy
Telephone: (39 0543) 474 411
Fax: (39 0543) 782 410
Web site: http://www.ferrettigroup.com

Private Company
Incorporated: 1968
Employees: 2,800
Sales: EUR 770 million ($880 million) (2006)
NAIC: 336611 Ship Building and Repairing

Ferretti Group SpA is one of the world's leading companies focused on the design and construction of luxury leisure and sports crafts and motor yachts. The Forli, Italy-based company is also one of the fastest growing, posting average revenues gains of more than 20 percent per year. A major factor in Ferretti's strong growth has been its active acquisition strategy, adding some ten world-renowned boat brands to its holdings since the late 1990s. The company's flagship remains Ferretti Yachts, which focuses on motor yachts in the 14 to 27 meter (46 to 88 feet) class, and includes the highly regarded Altura series. The company is the world leader in this size category of motor yachts.

Ferretti also owns such noted names as Riva, the world-famous producer of luxury open yachts, ranging from 10 to 35 meters in size; Pershing, which produces high-performance open cruisers; Bertram, based in the United States, focused on the sports-fishing yacht sector; Mochi Craft, a producer of "lobster" boats; Itama Cantieri, another open yacht producer; Custom Line, which produces composites-based maxi-yachts ranging from 94 to 128 feet; Apreamare, focused on the express cruiser segment; and CRN, which produces composite megayachts as well as steel mega-yachts with sizes ranging from 100 feet up to 141 feet and more.

In total, the company operates more than 20 shipyards, primarily in Italy, as well as in the United States and Spain. The company supports its ship design and construction activities with several subsidiaries, providing additional expertise in fiberglass production, yacht painting and refitting, the production of fittings, and the like. Ferretti also has a sales and marketing subsidiary specifically for the North American market, Ferretti Group USA. More than 78 percent of the company's sales, which topped EUR 770 million ($880 million) in 2006, come from outside Italy. Ferretti Group is led by Norberto Ferretti, who cofounded the company in 1968 and remains its chairman. In November 2006, U.K.-based private equity group Candover Partners paid EUR 1.7 billion to acquire 60 percent of Ferretti Group. Fulvio Dodich serves as the group's CEO.

SAILBOAT BEGINNINGS IN 1968

Norberto Ferretti and older brother Alessandro started out their working careers as salesmen at their father's new car dealership, which specialized in high-end sports cars, including Ferraris and the like. As youths, the Ferretti brothers spent much of their leisure time cruising along the Dalmatian coast. Norberto Ferretti in particular developed a love for sailing and as a boy succeeded in persuading his father to buy him his own 5.7 meter boat. In the late 1960s, the Ferrettis' love of boating led them to add a concession selling yachts from the family's car dealership. Yet Norberto Ferretti's interests quickly turned toward designing his own craft. This led the brothers to launch their own boat-building company in 1968. Norberto Ferretti, then just 20 years old, became largely responsible for design, while Alessandro oversaw the business end.

The Ferrettis initially focused on designing sailing yachts; their first craft, the Khamsin, was in fact a fishing vessel that the brothers converted to a sailing yacht. With a commitment to high quality and luxurious fittings, Ferretti Yachts, as the company was called, attracted the attention of the Italian yachting industry. Among them was Italian yacht-building legend Luciano Mochi, who suggested that the company expand beyond its initial focus on sailing vessels. As Norberto Ferretti recalled in an interview with Luxury: "It was Luciano Mochi, my second idol after Carlo Riva, who pushed me to move from sail to motor. He was tall and with a powerful way of walking; I was 23, when at the Genoa show he said: 'My compliments, you make beautiful things, but you have the advantage that with sail it is easier.'"

The Ferrettis took Mochi's advice, and by the early 1970s the company had added its first motor yacht designs. The company soon set itself apart from many of its more well-known rivals through its commitment to innovation not only in its exterior designs, but in its technical engineering as well. This effort led the group to develop the industry's first fiberglass-based motor yacht, the Altura 33. The use of the new material, far lighter than traditional steel construction, allowed the company to build smaller, faster yachts. The reduction in size played a major role in making yachting more accessible for a larger number of people, if only because far more marinas were able to accommodate the smaller vessels.

The rapid growth of this new yachting market encouraged the Ferrettis to focus their operations on motor yacht construction by 1987. In support of this, the company opened a new shipyard and company headquarters in Forli. The Ferrettis continued to attract attention, and sales, through their insistence on matching the beauty of their boats with a solid technical foundation. The company created a new dedicated engineering division at the Forli facility in 1987, in order to develop more sophisticated onboard systems for its craft. Two years later, the company added a research and development subsidiary as well.

These technical operations came in support of the company's decision to enter the high-stakes world of offshore powerboat racing in the late 1980s. Racing of course provided a high degree of public exposure for the company and its brand name. Nonetheless, the new activity also provided a boost for the company's technical expertise. As Ferretti told Yachting: "Racing has been an incredibly important part of the business. There has been an enormous feedback from the racing boats back into the production boats, particularly in terms of developing reliable onboard systems." Norberto Ferretti himself led the company's racing team, and by 1994 had captured the Class 1 Offshore World Championship. The following year, Ferretti won the European Offshore Championship as well.

COMPANY PERSPECTIVES

Passion for the sea, innovative technology and sophisticated design comprise the Ferretti navigational style. The speed, performance and innovation of a Ferretti motor yacht are evidenced in its history-making flybridge. Its razor-sharp lines, which cut through the waves. Reliability and safety features which let you tackle the sea. At the same time, the living space of a Ferretti motor yacht showcases advanced technological solutions with a bright, elegant and luxurious ambience. Ferretti yachts are true floating villas, intended for those who enjoy experiencing the infinite fascination of the sea while surrounded by exquisitely designed and intelligently planned living space.

NEW FINANCIAL PARTNER IN 1998

Ferretti Yacht continued to see modest growth through the first half of the 1990s. Yet the company was thrown into crisis in 1995, when Alessandro Ferretti died unexpectedly. Left without a business manager, Norberto Ferretti took over full leadership of the group. At the time, the global yacht building market remained highly fragmented, largely dominated by small-scale builders such as Ferretti Yachts. Yet this small size brought other restrictions, and made it difficult for companies to extend their range of yacht designs, categories, and sizes beyond their existing production. Meanwhile, the market began to experience the first signs of a strong upturn, as the revitalized global economy in the late 1990s had begun to create more wealthy individuals than ever before, as well as a growing new class of the super-wealthy. This rising wealth led many yacht owners to seek to exchange their existing vessels for ever-larger yachts. Yet Ferretti, which focused its production largely on the smaller 14-to-27-meter (46 to 88 feet) segment, found itself unable to keep up with its clientele's evolving desires.

Norberto Ferretti emerged as an entrepreneur in his own right in the late 1990s, as he began to steer the company from a small yacht builder into a fully fledged holding company. The company's first effort to extend its range came in the form of a partnership with Ancona-based CRN, itself a specialist in steel-hull megayachts, to launch Custom Line in 1996. Custom Line focused on the composite-based maxi yacht category, with vessels ranging from 94 to 128 feet.

ACQUIRING GROWTH AT THE TURN OF THE CENTURY

Yet Norberto Ferretti's plans to expand the company met with resistance from other family shareholders, including his sister and Alessandro Ferretti's heirs. At the same time, the small company lacked the funds to fund its expansion internally. Ferretti found the solution for both problems when he teamed up with Paolo Colonna, head of the Italian office for equity group Permira (then still known as Schroder Ventures Europe). In 1998, Permira bought out the other Ferretti family members, gaining control of 57 percent of Ferretti Yachts.

Backed by Permira's deep pockets, Norberto Ferretti launched his expansion plans in earnest. Rather than expand Ferretti Yachts itself, the company put into place an aggressive acquisition strategy in order to build up a strong portfolio of yacht brands—and yacht designs. The company took over full control of the Custom Line, which was then transferred under direction of Ferretti Yachts. Next, the company acquired a 50 percent stake in Cantieri Navali dell'Adriatico, the company behind the Pershing brand launched in the mid-1980s in order to produce high-speed, high-performance open cruisers. The Pershing brand grew particularly strongly under Ferretti's leadership, boosting its revenues by more than ten times before the middle of the first decade of the 2000s. In the meantime, by the end of 1998, Ferretti had swelled its ranks again, buying the United States' Bertram Yachts Inc. Founded in Miami in 1961, Bertram added its specialty in designing and constructing sports-fishing yachts to Ferretti's portfolio.

Ferretti's expansion drive continued into the following year, with the purchase of CRN. The Ancona-based company had been founded in 1963, and started out building 75-foot yachts. Before long, CRN had established a reputation as a world-leading producer of steel- and aluminum-hulled mega-yachts, gradually increasing the sizes of its vessels. The acquisition by Ferretti provided CRN with strong financial backing and support from Ferretti's design operations, and enabled the company to launch construction of still larger yachts for an increasingly wealthy (and demanding) clientele. By the dawn of the 21st century, the CRN-Ferretti collaboration had resulted in the launch of a new 141-foot mega-yacht, the Magnifica.

KEY DATES

1968:: Norberto and Alessandro Ferretti launch company designing yachts, starting with sailing yachts, then introducing first composite-based motor yacht in the late 1970s.
1987:: Company refocuses entirely on motor yacht operations and launches a dedicated engineering division.
1995:: Alessandro Ferretti dies unexpectedly; company forms partnership with CRN, launching Custom Line maxi-yachts.
1998:: Ferretti family sells 57 percent stake to Permida; launches acquisition drive buying Pershing, Bertram Yachts, CRN, and others.
2000:: Ferretti buys Riva Yachts and goes public on Milan exchange.
2002:: Permida acquires full control of Ferretti.
2006:: Permida agrees to sell 60 percent stake in Ferretti to Candover Partners for EUR 1.7 billion.

Ferretti prepared for its public offering by acquiring one of the yachting world's legendary names, Riva Yachts, in 2000. That company, founded in 1842, had focused on building smaller racing boats since the 1930s. Under the leadership of Serafino Riva, himself a noted racer, the company later expanded into the leisure segment. In the 1950s, under Carlo Riva, the company achieved international recognition as the symbol of Italian boat-building. Aiding the company was its adoption by such stars as Brigitte Bardo, Richard Burton, Peter Sellers, and Sophia Loren, and the use of Riva boats in the James Bond film series. Toward the end of the 1960s, however, the company was bought by the Whittaker group in the United States. Later, Riva was acquired by Vickers in the United Kingdom, as part of that company's attempt to develop a luxury yacht range in parallel to its Rolls-Royce–led luxury automobile operations. Yet, after Vickers sold Rolls-Royce, Riva languished.

Ferretti quickly revitalized the Riva line, launching a new series of designs in order to recapture the 1950s styling of the company's heyday. Ferretti also adapted its own technological and engineering expertise to its new brand, enabling Riva to extend its range of vessels up to 84 feet. The purchase of Riva in turn provided new cachet to Ferretti itself, helping to ensure the success of the group's public offering, completed in 2000. Permida used the offering to cash out on more than half of its holdings, earning the company more than 50 times its initial investment.

NEW OWNER IN 2007

The public offering allowed Ferretti to continue building up its list of yacht brands. In 2001, the company acquired Apreamare, which operated shipyards in Naples and Sorrento, and specialized in the production of offshore express cruisers. Next, Ferretti bought the Mochi brand name—Luciano Mochi's shipyard had itself fallen on hard times and gone bankrupt. In honor of the great Italian shipbuilder, Ferretti relaunched the Mochi brand, focusing its operations on the construction of lobster boats.

Ferretti continued to nurture plans for continued expansion, and prepared to return to the market for a fresh injection of capital. The September 11th terrorist attacks interfered with those plans, however. Instead, Permira decided to buy back full control of the company, paying EUR 674 million for Ferretti, which was delisted from the stock exchange in July 2002.

Permira maintained its high level of investment in Ferretti. The steadily rising market for mega-yachts led the company to expand its CRN operations, adding Cantiere Navale M. Morini, a highly respected shipyard in Ancona, in 2003. The following year, Ferretti boosted its technological component when it became the first company outside of Japan to acquire a new antirolling system developed by Mitsubishi Heavy Industries. The new gyro-based system helped minimize motion on ships, reducing levels of seasickness. Ferretti expected to take delivery of more than 140 of the devices over the next year.

Ferretti boosted its operations in other ways as well. The company opened the Advanced Yacht Technology Center as a central engineering and design facility for its various subsidiaries. Ferretti also invested in other areas, building a EUR 26 million shipyard in La Spezia in 2004, then launching construction of another EUR 55 million yard in Naples, which opened in 2006. The new facility also became Ferretti's largest, boasting 125,000 square meters, including a 10,000-square-meter private dock.

Ferretti achieved record growth through the early 2000s, growing from just $70 million in sales in 1997 to nearly $900 million by 2007. The company, already a world leader in the luxury yacht market, was also one of the fastest growing, achieving more than 20 percent revenue growth per year on average. By the end of 2006, Permida announced that it was preparing to relaunch Ferretti Group as a public company. Yet intense interest from the private equity sector led Permida to change its mind. Instead, in November 2006, the company announced Candover Partners had acquired 60 percent of the group, in a deal valued at EUR 1.7 billion. While Ferretti's public offering had been postponed, the company looked forward to further growth as the ranks of the world's mega-wealthy continued to swell in the new century.

M. L. Cohen

PRINCIPAL SUBSIDIARIES

Pershing SpA; Itama Cantieri Navali SpA; Bertram Yacht, Inc. (United States); Riva SpA; Apreamare SpA; Mochi Craft; CRN SpA.

PRINCIPAL COMPETITORS

Rodriguez S.A.; Ferretti Group SpA; Beneteau S.A.; Genmar Holdings Inc.; Azimut Benetti SpA; Friede Goldman Halter Inc.; Bavaria Yachtbau GmbH; Hatteras Yachts; Rodriquez SpA.