Wednesday, May 24, 2017

France’s Safran Cuts Offer for Zodiac Aerospace by About 15% to $8.2 Billion: Lower offer comes after a March profit warning from the beleaguered plane cabin-interior specialist

The Wall Street Journal
By Robert Wall and  Ben Dummett
Updated May 24, 2017 9:33 a.m. ET

French aerospace supplier Safran SA on Wednesday said it cut its bid price for Zodiac Aerospace SA about 15% to €7.3 billion ($8.2 billion) after renewed profit headwinds came to light at the beleaguered plane cabin-interior specialist.

Safranin January announced a plan to buy Zodiac Aerospace to become the world’s No. 3 aerospace supplier to Boeing Co. and Airbus SE behind  United Technologies Corporation and General Electric Company.

The deal quickly drew fire from hedge fund TCI Fund Management, which said Safran was overpaying. TCI urged Safran to abandon the deal and attacked the complicated transaction that it said gave preferential treatment to the Zodiac’s family shareholders and two institutional investors in the company.

Safran said in March that it was reviewing its offer after Zodiac issued a profit warning amid new problems in its seat-building business. The company already had been struggling to produce business class seats for Boeing and Airbus and other cabin interior items, such as toilet doors.

Safran on Wednesday said it would pay €25 a share for 100% of Zodiac shares. Safran originally had said it would pay €29.47 a share for Zodiac in a tender offer.

It also adjusted other elements of the complex deal.

The new structure offers an alternative to the cash offer for some Zodiac shares. Safran is offering preferred shares in exchange for Zodiac stock in a structure with an implied value of around €24 for each Zodiac share. This component is capped at 31.4% of Zodiac’s total outstanding the stock. The preferred shares carry the same rights as ordinary shares but have to be held for at least three years after the completion of the tender offer.

The deal’s completion is in part contingent on 50% of Zodiac shares with voting rights being tendered.

To placate investors such as TCI who were looking for Safran to return more capital to shareholders, Safran said if the deal goes through it would undertake a €2.3 billion share buyback over two years.

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