September 5, 2017 / 11:21 AM / 14 days ago

Safran on alert for assets from UTC's Rockwell tie-up

The logo of Safran Group is seen on the company's headquarters building in Toulouse, Southwestern France, April 18, 2017. REUTERS/Regis Duvignau

TOULON/PARIS (Reuters) - Safran would look at any assets that might come up for sale as a result of United Technologies’ planned $23 billion takeover of Rockwell Collins, the French company’s chief executive said.

“We will see, we will take a look, but it is much too early to move forward in this area,” Safran’s Philippe Petitcolin said on Tuesday on the sidelines of a defense conference.

Engines and parts maker United Technologies (UTX.N) reached a deal to create a new aerospace giant on Monday by buying avionics maker Rockwell Collins (COL.N).

The deal is subject to approval by regulators, although Cowen analysts said the combination presents “minimal overlaps”.

Other analysts said it could trigger movement lower down in the supply chain.

“When you have this type of merger between two very big players, that automatically leads to consolidation,” Petitcolin told reporters.

“Does it change anything fundamentally for a company like ours, I don’t think so,”

The tie-up comes as Boeing (BA.N) and Airbus (AIR.PA) try to capture more of the profits earned by their suppliers.

Industry sources said both planemakers have some concerns about the increased market power of the new combine, while rival suppliers could face tougher competition to win deals.

Petitcolin said he was not worried about a knock-on effect of increased pricing pressure in the supply chain.

“It is not just because you are bigger that you have more weight in competitions,” he said.

The head of Europe’s largest defense electronics firm, France’s Thales (TCFP.PA), also cast doubt on the benefits of scale.

“For now it changes nothing,” Chief Executive Patrice Caine told Reuters. “I have never believed in the race towards size.”

Safran’s Petitcolin, who is completing a $7.7 billion deal to buy seats maker Zodiac Aerospace, said he felt vindicated by the U.S. deal which includes Rockwell Collins’ recently acquired B/E Aerospace aircraft interiors business.

Safran faced some scepticism from investors over the merits of mixing its engines and equipment with Zodiac’s seats business, but says this will position the company for future developments towards smarter and more connected aircraft.

“The fact that UTC is buying Rockwell which itself has just bought B/E Aerospace proves that it is interested in the interiors business, so our initiative isn’t a silly one or lacking in long-term value-creation for our company,” he said.

Petitcolin also reiterated a target for CFM International, a joint venture with General Electric (GE.N), to build 450-500 LEAP aircraft engines this year.

CFM competes with United Tech subsidiary Pratt & Whitney.

Reporting by Cyril Altmeyer in Toulon, France, and Tim Hepher in Paris; editing by Alexander Smith

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