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Consolidation continues: Safran buys Zodiac Aerospace
Safran is a partner with GE on the Leap engine. © Safran

Consolidation continues: Safran buys Zodiac Aerospace

Less then three months after Rockwell Collins announced a $6.4bn deal to acquire cabin interiors specialist B/E Aerospace, an even-larger consolidation movement among tier 1 suppliers to Airbus and Boeing is under way in Europe folllowing the announcement that Safran has launched an agreed €8.5bn bid to acquire Zodiac Aerospace.

On 19th January the two French companies announced that they have entered into exclusive negotiations for an acquisition of Zodiac Aerospace by Safran through an agreed public offer of €29.47 per share and a subsequent merger on the basis of 0.485 Safran shares for one Zodiac Aerospace share. Prior to and conditional upon the merger, Safran would distribute a special dividend of €5.50 per share to its existing shareholders.

Zodiac Aerospace's founding families, FFP, Fonds Stratégique de Participations and the French State intend to remain core shareholders of Safran with around 22% of its capital, and, upon completion of the transaction, to sign a shareholders agreement comprising a two-year lock-up provision.

Zodiac has been struggling to overcome production difficulties which have impacted deliveries of Airbus and Boeing aircraft. Safran says the deal would enable Zodiac Aerospace's seats and interiors business to accelerate their recovery and progress towards or above their historical margin levels.

The transaction would create a global leader combining Safran's capabilities in landing gear, wheels and brakes, nacelles, power systems, actuation and avionics, with Zodiac Aerospace's leading positions in seats, cabin interiors, power distribution, lighting, fuel, oxygen and fluid systems and safety equipment.

In electrical systems, Zodiac Aerospace's assets would reinforce Safran's portfolio of technologies and position the group for future developments towards the "more electrical aircraft".

On a pro forma basis, including Safran's propulsion business, the combined group would have around 92,000 employees (of which more than 45,000 in France), around €21.2bn in adjusted revenues and around €2.7bn in adjusted recurring operating income. On this basis the combined group would form the third-largest aerospace equipment supplier worldwide, behind GE and United Technologies Corp.

Safran says the new entity would fuel organic growth, limit exposure to aircraft-OEM delivery cycles and improve Safran's exposure to a dollar-denominated cost-base, especially in North America where Zodiac Aerospace has a large footprint.

Safran has already identified €200m of cost synergies, of which 50% should be achieved in year 1 and 90% in year 2.

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