Reuters logo
3 months ago
CORRECTED-UPDATE 2-Zodiac aims to complete Safran deal, CEO offers resignation
April 28, 2017 / 5:53 AM / 3 months ago

CORRECTED-UPDATE 2-Zodiac aims to complete Safran deal, CEO offers resignation

4 Min Read

(Corrects value of proposed Safran offer to 29.47 euros from 29.37 euros, para 13)

* Zodiac says CEO offered to resign, to stay on for a while

* Hopes to complete Safran merger deal, studies alternative

* Issues second profit warning in as many months

* Shares recover partially after sharp fall on Thursday

By Tim Hepher and Cyril Altmeyer

PARIS, April 28 (Reuters) - Zodiac Aerospace said its chief executive planned to quit and added to a litany of profit warnings as it reaffirmed hopes of merging with engine maker Safran to end a prolonged crisis in its aircraft seats plants.

The French firm said it had asked CEO Olivier Zarrouati to stay on "for a while" to try to complete the $9 billion merger, but added it was working on a backup plan in case the idea to forge the world's third-largest aero supplier fell through.

The companies announced plans for Safran to take control in January, but the deal ran into criticism from some shareholders and uncertainty created by new problems at Zodiac's UK plants.

Zodiac said it had appointed a new special board adviser and asked Zarrouati to stay on for an unspecified period to focus on finalising and executing the merger "if Safran and Zodiac come to a renewed agreement, which is what we want."

Speaking to reporters in a conference call, Zarrouati described the tie-up as "our priority scenario".

But he said an alternative was necessary due to obstacles faced by the merger proposal.

In a delayed announcement that was postponed by a week due to what Zodiac described as pressure of work, the company posted a fiscal first-half current operating loss of 12 million euros, blamed mainly on its aircraft interiors business.

It forecast a 200-220 million euro current operating profit for the year to end-August 2017 as a whole, implying a decline of up to 26 percent from the previous year's 269.6 million euros. In March it had forecast a 10-20 percent decline.

Tci Unhappy

Zarrouati, who has overseen some 10 profit warnings since Zodiac first discovered it could not keep pace with a boom in airline orders for its aircraft interiors, said Zodiac had added "an extra layer of caution" to its forecasts.

But the strongest critic of the deal, UK hedge fund TCI Fund Management, said the second profit warning in as many months cast doubt on its predictions of a strong second-half recovery.

"These are disastrous results from Zodiac yet again... Zodiac's business continues to implode with no sign of recovery," TCI founder Christopher Hohn said.

"Zodiac is in serious financial difficulty and we think it needs an emergency rights issue, which would cause the Zodiac share price to fall substantially," he said in an emailed statement, adding that the appointment of a new special board adviser was a distraction from the company's problems.

TCI has waged a public campaign to persuade Safran to cancel its proposed 29.47 euros a share offer for Zodiac, which it says would pay almost three times what Zodiac is worth.

But shares in Zodiac recovered some ground after falling sharply ahead of the results. They were up around 2.8 percent at 21.43 euros in early trading, but still well below the anticipated offer price.

Zodiac plans to speed up its restructuring, Zarrouati said.

Talks with Safran are proceeding well, and Zodiac is waiting for Safran's conclusions on a due-diligence exercise, he added.

Safran had no immediate comment. (Reporting by Tim Hepher, Cyril Altmeyer; Editing by Andrew Callus and Keith Weir)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below