Safran to buy Zodiac for $10.5bn

Paris: Aircraft-engine maker Safran SA agreed to buy plane-seat supplier Zodiac Aerospace SA for almost €10bn ($10.5bn) in an all-French deal that will unite two of the country’s biggest aerospace groups.
Safran will offer €29.47 per share in cash, 26 percent above Wednesday’s close, the companies said yesterday. If half of Zodiac’s equity is tendered, Safran will complete the purchase via a share swap, paying stock that was worth €29.96 on Wednesday for each remaining Zodiac share, excluding a special dividend to be paid to Safran investors before the deal closes.
Safran, General Electric Co.’s partner in the CFM International alliance that produces engines for short-haul jets, is buying Zodiac after the cabin maker issued multiple profit warnings and saw its share price tumble amid delays in the supply of seats for Airbus Group SE’s latest A350 wide-body jet. The deal provides an all-French solution that’s likely to help allay concerns at Toulouse-based Airbus while building up a new national aerospace champion.
Philippe Petitcolin, Safran’s Chief Executive Officer, said the deal will create the world’s third-biggest aerospace supplier behind GE and Pratt & Whitney owner United Technologies Corp.. Petitcolin will continue to run the group with Zodiac CEO Olivier Zarrouati as his deputy.
Zodiac’s founding families and two investment funds -- the Peugeot family’s FFP and the Fonds Strategique de Participations -- have agreed to accept Safran stock and to hold it for at least two years. Together with a 14 percent stake held by the French state, Safran will now have a bigger bloc of long-term investors, helping to insulate management from short-term pressures. Safran shares rose as much as 3.9 percent to €68.87 in Paris, while Zodiac gained 24 percent to €28.85, 62 cents shy of the offer price. The interiors specialist has seen its value slump 22 percent over the past two years, during which time Safran’s worth has increased by one-third.
The combination will unite Safran activities spanning turbines, landing gear, brakes and avionics with Zodiac’s cabin interiors, fuel, lighting, safety and power-distribution gear. The buyer is also keen to access Zodiac technology key to development of the “more electrical aircraft,” it said.
The enlarged group will have 92,000 staff, half of them in France, more than €20bn in sales and recurring operating profit of €2.7bn.
Paris-based Safran was formed in 2005 from a merger of engine maker Snecma and security specialist Sagem, and traces its origins to Gnome, which was founded in 1905 and made the first rotary aviation engine. Zodiac traces its origins to 1896 and the production of the first hot-air balloons for sport and tourism.
Safran has identified cost savings of €200m, mainly from joint procurement and marketing, and will also aim to “accelerate” the recovery of Zodiac’s seats business, according to the statement.