Safran to buy Zodiac Aerospace for $9 Billion as the two French aero giants decide to combine

Company - Himanshu Gill - Jan 19,2017

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safran to buy zodiac aerospace for 9 billion as the two french aero giants decide to combine

French aircraft engine maker Safran SA announced that it has agreed to buy Zodiac Aerospace in a 8.5 billion euro ($9 billion) deal to create world’s third largest aerospace supplier.

After this deal, Safran will stand only after Airbus SE and Boeing Co. that have a combined $23 billion sales and employs around 92,000 people. The deal comes amid rising pressure from Airbus and Boeing on global suppliers as they try to ramp up production to meet record number of orders. They have been offering there products at considerable discounts.

Safran would pay 29.47 euros per Zodiac Share. Investors would receive 0.485 Safran shares for each Zodiac share excluding a 5.5 euro per share special dividend to be paid before closing. Zodiac shares closed at 23.31 euros, up by 20 percent, while Safran shares bolstered by 1.7 percent after the announcement this week.

This structure will allow Zodiac’s family shareholders and the two institutions to stay as investors in the combined company. The deal is valued at 9.7 billion euros including debt.

Both boards have supported the deal but it still requires approval from shareholders and that from regulators. The deal comes just three months after Rockwell Collins Inc. agreed to pay $6.4 billion for the purchase of Zodiac's chief rival B/E Aerospace Inc. in a deal that have united two of the biggest suppliers to airlines and airplane makers.

Safran and Zodiac said that the combination of their companies would generate at least 200 million euros as annual pre-tax savings. Half of them would come in the first year itself, the companies said.

Ross McInnes, Chairperson of Safran, said that the deal has strengthened the company’s vision of boosting its aerospace activities.

This is not the first time that Safran has tried to acquire Zodiac. In 2010, Zodiac rejected the takeover proposal from the company.