PARIS: French engine maker Safran launched an agreed €8.5bn cash bid for troubled aero plane seat maker Zodiac Aerospace, uniting France’s two largest aeronautic suppliers and marking the latest move towards consolidation in the sector.
According to details, Safran said it was buying Zodiac after its share price slumped almost 22 per cent over two years following problems in the production of seats for Airbus’s latest A350 wide-body plane.
The deal comes amid broader pressure from Airbus and Boeing on global suppliers as they attempt to ramp up production to meet record order backlogs. It follows the $6.4bn acquisition of B/E Aerospace by Rockwell Collins last year.
It is also the latest big deal in France just months before the presidential election in April and May. This week Italy’s Luxottica and France’s Essilor agreed to a €50bn deal that would create the global leader in the fast-growing eyewear industry.
Executives at the groups saluted the creation of a European champion, which will be the world’s third largest aerospace supplier by revenue. Olivier Zarrouati, chairman of Zodiac Aerospace’s management board, said he was “excited by the prospect of joining Safran and creating a global leader, with a strong European base”.
A deal between Safran and Zodiac has been rumoured for years. Safran attempted to strike a deal with family-controlled Zodiac in 2010 only to be rebuffed before launching a formal bid. It made inquiries again last year, according to people close to the discussions.
Zodiac has been struggling, issuing several profit warnings over the past three years due to delays in aircraft seat production and problems with other equipment such as toilets. This has led to public criticism from Airbus and Boeing.
Last year Zodiac made progress in the redesign and production of both seat shells for Boeing and lavatories for the A350, but investors have remained sceptical that the company’s problems were completely dealt with.
The offer by Safran values Zodiac at a 26 per cent premium to Wednesday’s closing share price of €23.31.
Safran was advised by Lazard and Bank of America Merrill Lynch, while Rothschild and BNP Paribas advised Zodiac.
