July 28, 2021

Safran-Zodiac: The Marriage Will-There-It-Place?

Will Safran finally give up its union with Zodiac? The bets are open |
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The aeronautical equipment manufacturer has once again reported catastrophic financial results. To the point of calling into question its union with the engine manufacturer Safran? Zodiac’s staff admits to working on an “alternative scenario” because of the “headwinds” encountered by the alliance project.

The publications follow and resemble each other for Zodiac Aerospace which, quarter after quarter, irremediably widens its losses and aligns with disconcerting regularity the warnings on the result. Indeed, only a month and a half after the previous profit-warning, the group led by Olivier Zarrouati – who resigned yesterday or more prosaically who made his mandate available to the board – has indicated that its current operating profit for 2016-2017 would oscillate between 200 and 220 million euros. Where the group’s previous forecast – presented in mid-March in the wake of quarterly sales – was closer to 240 million euros.

“We have added an additional layer of caution in our assessment”, modestly declared to journalists the president of the executive board Olivier Zarrouati. A declaration marked by fatalism and helplessness. The high point – but undoubtedly not the end point – of the slow agony of the equipment manufacturer who continues his Stations of the Cross while the exclusive negotiations with Safran, if they continue, are not certain to be crowned with success. clouds are gathering above the head of a crumbling group.

A marriage in danger

Pressed from all sides, especially by the activist fund TCI which, for months, has been trying to annul the “marriage” through particularly well-organized undermining, Zodiac Aerospace publicly affirms that the scenario of a union with Safran remains the scenario privileged. Thus, Olivier Zarrouati, if he resigned as mentioned above, will remain in office, at the request of the supervisory board, in order to support the new special advisor of the group, the former CEO of the automotive supplier Faurecia. , Yann Delabrière. A “team” supposed to last while the discussions with Safran are finalized. Nevertheless, the staff of the aeronautical equipment manufacturer nevertheless admits to the “Stand Alone” eventuality, namely that the group ultimately retains its independence. Difficult to imagine as it is, as the group is dragging its pain and its burden, symbolized by the endless difficulties of its Headquarters branch.

“The change in governance strengthens the credibility of the two possible scenarios”, Olivier Zarrouati said, bluntly asserting that the merger with Safran remained Zodiac’s priority scenario. While justifying the “study” of maintaining Zodiac as an independent entity. “An alternative scenario to a merger with Safran must exist because of the headwinds encountered by the project”. For clarity, we’ll come back. A lucidity which investors in the stock market have nevertheless shown, welcoming the departure of Olivier Zarrouati which allows the title to progress by more than 3.7% less than an hour after the opening.

What repercussions for Safran?

What about the “other half” of the couple, in this case Safran? In view of the group’s financial difficulties, the engine manufacturer could be tempted to drastically revise its takeover offer downwards. As a reminder, Safran initially offered € 29.47 per Zodiac share. A “proposal” nevertheless submitted on January 19. An eternity on the stock market. Especially since the price of the title has been heckled since. Proof of this is, on the only day yesterday, the Zodiac share plunged 6.52% to 20.85 euros. The right price to get hold of Zodiac?

It is still obviously much too expensive for the TCI fund, which judges the price of a Zodiac share to be between 10 and 15 euros. Reacting to these results, Chris Hohn, head of the activist fund TCI, did not slack off and criticized Zodiac’s strategy in such circumstances. Attacking in particular the appointment of the former boss of Faurecia. “The announcement of the appointment of a special advisor at Zodiac is clearly a distraction,” considering that the equipment manufacturer, in a critical situation, needed a capital increase. Before delivering the final blow. “Safran greatly overpays Zodiac and should cancel its takeover plan immediately.”