A deal that would create the world’s third-largest supplier to the aerospace industry was announced Thursday morning. France’s Safran said it has agreed to acquire cabin-interior maker Zodiac Aerospace for $9 billion. Including the assumption of Zodiac’s debt the deal is valued at about $9.7 billion.
Zodiac, which is also based in France and makes cabin seating and other cabin equipment for both Boeing Co. (NYSE: BA) and Airbus, has struggled recently with timely delivery of seating for new aircraft from both major manufacturers. Delays in delivering toilets for the Airbus A350 earned the company a public scolding from the European jet maker.
The combination would create the third-largest aerospace supplier in the world after United Technologies Corp. (NYSE: UTX) and General Electric Co. (NYSE: GE). Safran, UTC and GE manufacture aircraft engines and supply many other parts to aircraft makers.
Three months ago, another U.S. supplier, Rockwell Collins Inc. (NYSE: COL), agreed to buy Zodiac’s main competitor, B/E Aerospace, for $6.4 billion as the supplier industry consolidates, seeking greater scale as companies seek to run more efficiently.
According to the announcement, Safran is paying €29.47 (about $31.45) for each Zodiac share in a tender offer. The price represents a premium of 24.6% to Zodiac’s closing price on Wednesday.
If 50% of shares are tendered, the merger will be completed, based on an exchange of 0.485 a Safran share for each Zodiac share. Safran shareholders will receive a €5.50 (about $5.90) special dividend per share before the merger closes.
Family shareholders and two institutional investors combined hold 32% of Zodiac’s shares and “would undertake to contribute their shares to the merger” and intend to remain shareholders in Safran, of which they will hold a stake of about 22% following the merger.
Safran said it will finance the cash portion of the transaction and its special dividend with a combination of cash on hand, including future proceeds from the disposals of Safran Identity & Security, existing committed undrawn facilities and a €4 billion fully underwritten bridge loan.
Safran stock traded down about 1.2% on the Paris exchange, at €66.46 in a 52-week range of €54.67 to €69.89. The 12-month consensus price target on the stock is €72.74.
Zodiac, which also trades in Paris, was up nearly 22% to €28.41, in a 52-week range of €14.08 to €28.85. The high was posted this morning.