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Safran to buy Zodiac in $10 billion aerospace deal

Zodiac Aerospace, 3225 Woburn St., Bellingham.
Zodiac Aerospace, 3225 Woburn St., Bellingham. The Bellingham Herald file

Aircraft-engine maker Safran SA agreed to buy plane-seat supplier Zodiac Aerospace SA for about $10.5 billion in an all-French deal that will unite two of the country’s biggest aerospace groups.

Safran, General Electric Co.’s partner in the CFM International alliance that produces engines for short-haul jets, is buying Zodiac after the cabin maker issued multiple profit warnings and saw its share price tumble amid delays in the supply of seats for Airbus Group SE’s latest A350 wide-body jet. The deal provides an all-French solution that’s likely to help allay concerns at Toulouse-based Airbus while building up a new national aerospace champion.

Zodiac Aerospace has a facility at 3225 Woburn St. in Bellingham, where it makes a variety of aircraft interior products. As of early 2014, the Bellingham plant employed around 500 people. Safran has a facility in Everett.

Philippe Petitcolin, Safran’s chief executive officer, said the deal will create the world’s third-biggest aerospace supplier behind GE and Pratt & Whitney owner United Technologies Corp., and accelerate the return of Zodiac’s interiors operations to “historical levels of profitability.” Petitcolin will continue to run the group with Zodiac CEO Olivier Zarrouati as his deputy.

French President Francois Hollande said in a statement that he welcomed the agreement, describing it as a “beautiful industrial operation.”

The transaction appears to be more of a “marriage of convenience” than one borne out of common sense, Aerospace consultant Howard Wheeldon said in a note, adding that Safran mustn’t be deflected from its work on the CFM Leap engine developed for new generation Airbus A320 and Boeing Co. 737 planes.

“As in so many of the various industries that the French government reckons are in the national interest, today we see another example of a behind-the-scenes move by those in France to ensure that French companies will stay in French hands,” Wheeldon said.

The combination will unite Safran activities spanning turbines, landing gear, brakes and avionics with Zodiac’s cabin interiors, fuel, lighting, safety and power-distribution gear. The buyer is also keen to access Zodiac technology key to development of the “more electrical aircraft,” it said.

The enlarged group will have 92,000 staff, half of them in France. Paris-based Safran was formed in 2005 from a merger of engine maker Snecma and security specialist Sagem, and traces its origins to Gnome, which was founded in 1905 and made the first rotary aviation engine. Zodiac traces its origins to 1896 and the production of the first hot-air balloons for sport and tourism.

Andy Chambers, an analyst at Edison Investment Research, said in a note that while the synergies appear limited, the merger’s timing “looks favorable” in terms of Zodiac’s potential recovery over the next 18 months.

The Bellingham Herald business editor Dave Gallagher contributed to this report.

Dave Gallagher: 360-715-2269, @BhamHeraldBiz

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