BEAV B/E Aerospace, Inc.

By Robert Wall 

LONDON--French aerospace supplier Safran SA said Thursday it had agreed to buy Zodiac Aerospace in a deal that values the beleaguered French plane cabin interiors specialist at EUR8.5 billion ($9 billion).

The two companies said Safran would create the world's No. 3 aerospace supplier to the big plane makers Airbus SE and Boeing Co, with a combined EUR21 billion in shares.

Safran would pay EUR29.47 a Zodiac share, while investors receive 0.485 of a Safran share for each of Zodiac's, excluding a EUR5.50-a-share special dividend to be paid before closing. Zodiac shares closed Wednesday at EUR23.31.

Both boards back the deal, which still requires approval from shareholders and regulators.

The move comes only three months after Rockwell Collins Inc. agreed to pay $6.4 billion to buy Zodiac's chief rival, B/E Aerospace Inc. in a deal that would unite two of the biggest suppliers to airlines and plane makers.

Boeing and Airbus, The world's largest plane makers, are putting increased pressure on their suppliers for discounts as they seek to win orders from airlines for new planes by offering lower prices. That has caused suppliers to seek greater scale to gain efficiencies.

But some combinations have run into trouble with the plane makers on concerns that consolidation could go too far. Honeywell International Inc. less than a year ago pulled the plug on its $90 billion bid for United Technologies Corp. amid opposition from Airbus and Boeing.

Safran and Zodiac said the combination of the two French companies would generate at least EUR200 million in annual pretax savings. Half of those would come in the first year, the companies said.

They don't expect big layoffs because of the complementary nature of the businesses, Safran Chief Executive Philippe Petitcolin told reporters.

Safran Chairman Ross McInnes said the deal underpinned the company's plan to bolster its aerospace activities.

Safran, a maker of everything from plane wiring to aircraft engines, has long had interest in acquiring the smaller French aircraft supplier. Zodiac in 2010 rejected a takeover proposal from the company.

The renewed takeover plan comes after a turbulent period for Zodiac. The company fell behind on providing seats to airlines for Boeing and Airbus jets, angering customers, delaying plane deliveries, and causing some carriers to seek new suppliers. Airbus also publicly chastised Zodiac for late delivery of plane toilet components for the European plane maker's new A350 long-range jet.

The companies said Safran would enable Zodiac to more quickly overcome problems in its troubled seats and plane interior business. Mr. Petitcolin said resources wouldn't be diverted from a key aircraft engine Safran builds in partnership with General Electric Co. for Airbus and Boeing.

Shares in Zodiac had declined more than 10% over the past two years despite record plane deliveries during the period.

Safran said it would finance the transaction from cash, proceeds of already agreed disposals, existing debt facilities and a EUR4 billion bridge loan. It said it would target an investment grade profile upon closing and its dividend payout plan of around 40% of adjusted net income.

Bank of America Merrill Lynch and Lazard advised Safran. BNP Paribas and Rothschild worked with Zodiac Aerospace.

Write to Robert Wall at robert.wall@wsj.com

(END) Dow Jones Newswires

January 19, 2017 02:23 ET (07:23 GMT)

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