isis_interior.jpg Zodiac Aerospace

Safran Highlights Aftermarket Potential of Zodiac Merger

€8.5 billion deal was announced early on Thursday.

French aerospace group Safran has added to its capabilities with an €8.5 billion ($9.5 billion) purchase of struggling cabin equipment supplier Zodiac Aerospace.

Safran’s €29.47 ($31.40) offer represented a 26 per cent premium on Zodiac’s pre-deal valuation, but was more than 10 per cent lower than the company’s mid-2015 peak price.

Since then Zodiac has struggled to meet contracts with Boeing and Airbus, causing the latter to miss its production targets for the A350 in 2015.

Zodiac supplies seat, toilets, emergency equipment and other cabin items.

Safran, has extensive design, production and aftermarket capabilities in landing gear, wheels and brakes, nacelles, power systems, actuation and avionics.

The company, via its subsidiary Snecma is also one half of CFM, the manufacturer of the CFM56 and LEAP lines of narrowbody engines.

“The technological complementarities will ensure that we accelerate domains as strategic as critical systems and the more electrical aircraft, which make up 40 per cent of Zodiac Aerospace’s activities,” says Safran CEO Philippe Petitcolin.

He added that Safran would help Zodiac overcome its recent problems and “accelerate the return to their historical levels of profitability in the seats and cabin activities”.

Safran’s leadership also noted that the acquisition would help deliver smooth revenues during dip in aircraft delivery cycles due to Zodiac’s strong post-delivery and aftermarket revenue stream.

Zodiac does not separate its maintenance and spares sales in its financial reporting, though its most recent quarterly statement did note that a decline in aerosystems revenue was “partly compensated by a good first quarter for aftermarket”.

Combined, the two French companies say they would form the third-largest player in the aerospace market, with an annual revenue of €21 billion ($22.1 billion) and operating income of €2.7 billion ($2.8 billion).

However, the deal is still subject to shareholder approval and the merger will not be finalised until early next year.

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