Safran (PA:SAF) has finally announced its intention to merge with Zodiac Aerospace (PA:ZODC). A cash tender offer at €29.47 per Zodiac share represents a premium of 24.5% to Wednesday’s closing price. This is a deal that has been on the cards for most of this decade and will create the world’s third-largest aerospace supplier after UTC and GE. Safran announced last year that it wanted to focus on its core business of civil aerospace, and merging with Zodiac is consistent with that. However, there is a risk that integrating such a large acquisition will be a distraction for management from its focus on ramping up output of its existing business.
Creating a new aerospace giant to rival US peers
This announcement ends nearly a decade of speculation about potential consolidation in the French aerospace and defence market. The merger of Safran and Zodiac Aerospace will create the world number three in aerospace with revenues of €21bn, balanced between propulsion and aircraft equipment, and in aircraft equipment alone it will be the number two player. The new Safran will look a lot like two divisions of the US firm United Technologies (NYSE:UTX), with positions across the whole aircraft value chain and exposure to all key aircraft programmes.
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