Safran shareholders approve plan to buy Zodiac Aerospace


Financier Worldwide Magazine

August 2017 Issue

Following months of wrangling, international high-technology group Safran and French aerospace group Zodiac Aerospace has announced a business combination agreement to create the world’s third largest supplier to the aerospace and defence markets.

The agreement, which supersedes a previously agreed transaction structure (announced on 19 January 2017), will see Safran take over Zodiac for $8.7bn – $1bn less than the deal agreed earlier in the year. The transaction has received much shareholder criticism over the past six months, as well as warnings of a profits downgrade from Zodiac.

Under the terms of the new agreement, the contemplated transaction structure consists of a tender offer by Safran for Zodiac Aerospace’s shares with: (i) a primary cash offer targeting 100 percent of Zodiac Aerospace’s shares at a price of €25 per Zodiac Aerospace share; and (ii) a subsidiary exchange offer targeting a maximum of 31.4 percent of Zodiac Aerospace’s shares under which Zodiac Aerospace shareholders would receive a number of Safran preferred shares.

Furthermore, the offer is subject to a pro-rata reduction mechanism so that the overall number of Zodiac shares tendered in the subsidiary exchange offer does not exceed 31.4 percent of the targeted share capital. The primary cash offer is not dependent on any limitation or reduction mechanism. The completion of the tender offer is also subject to reaching the mandatory overall acceptance threshold of 50 percent of Zodiac’s share capital or voting rights and a voluntary overall acceptance threshold of two-thirds of the exercisable voting rights of Zodiac.

“Safran’s board is very proud to confirm this fresh start with respect to this planned acquisition,” said Ross McInnes, chairman of Safran’s board of directors. “We have carefully listened to our shareholders’ reactions since January and taken constructive remarks into consideration. We are absolutely convinced by the strategic rationale of this project and are fully confident in Safran’s management team’s ability to implement it. We strongly recommend our shareholders to vote in favour of related resolutions at our next AGM.”

Operating worldwide across three core businesses (aerospace, defence and security), Safran has nearly 66,500 employees and logged systems and equipment sales of €15.8bn in 2016. Comprising a number of companies, Safran holds, alone or in partnership, world or European leadership positions in its markets. The tier-1 supplier undertakes extensive research & development programmes to keep pace with its fast-evolving markets, including expenditures of €1.7bn last year.

In comparison, Zodiac is a world leader in aerospace equipment and systems for commercial, regional and business aircraft and for helicopters and spacecraft. The firm develops and manufactures state-of the-art solutions to improve comfort and facilities on board aircraft and high-technology systems to increase aircraft performance and flight safety. Zodiac has 35,000 employees worldwide and generated revenue of €5.2bn in 2015/2016.

Financial advisers to Safran were Bank of America Merrill Lynch and Lazard while BDGS and

Jones Day served as legal counsel. Goldman Sachs Paris Inc. et Cie acted as financial adviser and Darrois Villey Maillot Brochier acted as legal adviser to the Safran board of directors. For Zodiac, Paribas, HSBC France and Rothschild acted as financial advisers while Bredin Prat served as legal counsel. Citigroup acted as financial adviser and Orrick Rambaud Martel as legal adviser to Zodiac Aerospace’s supervisory board.

Olivier Zarrouati, chief executive of Zodiac Aerospace, concluded: “By joining Safran, Zodiac

Aerospace’s activities will participate in creating a global leading player, with significant growth prospects.”

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Fraser Tennant

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