M&A

Joining the yacht club

Zhongwang drops Aleris bid and turns to boat builder

SilverYachts-w

Sail on silver girl: Zhongwang’s latest purchase serves the uber-rich

In his own country, he has been bestowed with the title “constructor of socialism with Chinese characteristics.” It is not a moniker that was ever likely to play well in the US, where Zhongwang Group’s chairman, Liu Zhongtian, has been castigated as a kind of Mexican bandit for “evading and circumventing US laws” by stockpiling aluminium south of the border.

Over the past 15 months, the Hong Kong-listed group has also been the subject of numerous letters to the US Treasury Secretary regarding its proposed $1.3 billion takeover of Aleris Corp. The aluminium manufacturer’s private equity backers have been trying to sell the Cleveland-based group to Zhongwang, which said it would create 1,000 jobs across Kentucky, Ohio, Michigan and Iowa.

But Zhongwang’s bid was scrapped earlier this week after it became clear the deal was likely to be rejected on security grounds (Aleris manufactures a form of aluminium used in tanks and other armoured vehicles). “It’s a form of protectionism,” Bei Ming from the Chinese Academy of International Trade and Economic Cooperation told the Global Times.

While one M&A deal has failed for Liu, two others have succeeded, marking his company’s first international forays.

Nearly two months ago, Zhongwang announced its intention to push into Germany’s industrial heartland, buying Ruhr-based Aluminiumwerk Unna for an undisclosed sum. According to Liu, the German firm’s advanced technology and customer base – including Boeing and BMW – should facilitate another step up the value chain in aluminium products.

Zhongwang has also just unveiled a deal to purchase Australia’s SilverYachts. Chinese tycoons have been active buyers of the world’s leading yachting brands (Wanda bought Sunseeker, and Weichai purchased Ferretti), but not so adept when it comes to improving their profitability.

Zhongwang and SilverYachts believe they have better synergies. The former gets a buyer for its products (the luxury firm’s yachts are made of aluminium, Zhongwang’s core business) and the latter a foothold in the China market. SilverYachts director, Jona Kan, tells ifeng.com it had been trying and failing to find a suitable partner for some time. “China is good at building large vessels like cruise liners and container ships,” he says. “However, it’s not as advanced as we imagined when it comes to small boats.”

The Chinese have not had much of a boating tradition since Zheng He lowered his sails in the fifteenth century. Earlier this decade, it seemed this might change as tycoons snapped up super yachts to match their private jets. However, domestic manufacturers have reported dwindling interest.

Zhongwang seems unfazed and plans to construct a shipyard in China to build SilverYacht’s larger vessels and speedboats.


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