Saturday, January 21, 2017

Saffron-Zodiac : what can disrupt the deal – The

And if the redemption of Zodiac Aerospace Safran fails ? If this ambitious reconciliation industrial, which must give birth to a heavy weight of the aeronautical world, fell in the water ? Several observers have asked the question. Because the structure of the transaction poses a risk. And more specifically, the choice to provide two types of offers to the shareholders of Zodiac with two steps completely linked, since the success of the first condition for the whole operation.

Two tenders, two calendars

In effect, it provides for in a first time a public purchase offer (OPA) of Saffron on Zodiac, 29,47 € per share to the Zodiac, of which the success threshold is set at 50% of the share capital of Zodiac. Then, it provides, in a second time (and provided that the TAKEOVER offer is successful) a merger for the shareholders of Zodiac, who have not participated in the TAKEOVER bid, to enable them to transform their actions to the Zodiac in the actions of Saffron, according to the parities of exchange “consistent” with the price of the TAKEOVER.
in other words, Safran offers two different offers for the shareholders of Zodiac, one in cash (the OPA), the other in exchange for shares (the merger), knowing that the first must be successful to trigger the second. If a significant number of shareholders of Zodiac does not subscribe to the tender offer, the deal capotera.

Some of the shareholders of Zodiac are reluctant

however, according to some analysts, many investors are not very hot to sell their shares at a price of 29,47 € and calling for a revaluation of the price proposed by Safran for the OPA, or another type of transaction, such as a public offer of exchange (OPE), to convert their shares into shares of Saffron. Certain shareholders of Zodiac, who have purchased their securities at a price higher than the 29,47 euros proposed by Safran for the TAKEOVER, are indeed reluctant to sell their shares.

applications of the reference shareholders of Zodiac

Problem for them : the structure imposed by Saffron is the only one possible.

Yes, there is a risk, but there is no other solution to succeed on this deal, ” says one close to the folder. Because the reference shareholders of Zodiac that are the families of the founders of the company (Domange, Marshal, Angels, Schelder..), and the institutional shareholders (FFP and the fonds stratégique de Participations) do not want to sell their units, but prefer instead to redeem their shares of Saffron, while retaining their voting rights double in Saffron. They will, therefore, not the OPA. Given their weight (32% of the share capital and 45% of the voting rights of Zodiac), to TAKEOVER all of the titles were impossible. A public exchange offer (OPE) was not possible because, legally, it does not allow shareholders to retain their right to vote doubles in Saffron.

“The merger is the only way to keep their double voting rights,” said a connoisseur of the folder. “Legally, it is the only way to maintain the legal entity of the Zodiac in a broader entity,” adds another.

The system devised therefore appears as the only possible to succeed in this deal. So far, there is a constraint with this merger. The reference shareholders of Zodiac will not be able to sell their securities for two years.

“The ball is in the camp of the other shareholders of Zodiac”

Result, the operation is suspended at the attitude of the other shareholders of Zodiac. With the risk that they do not subscribe to the TAKEOVER bid (in the hope that others will do it) in the idea of participating in the merger transaction, their eyes more attractive. If too many of them reason as well, the threshold of 50% of participants in the MTO might not be reached.

“If they really want to share Saffron, nothing prevents them to sell their securities at the time of the TAKEOVER and to buy behind shares in Safran, noted two connoisseurs of the folder.

“The ball is in the camp of the shareholders of Zodiac. If they do kill off the deal, they are likely to take a bullet in the foot,” says one of them, believing that in case of failure, the Zodiac would leave again to the downside and should have to wait several years before reaching 29,47 euros per share proposed by Safran.

The offer represents a premium of 26.4% compared to the market price of 18 January (23 euros), the day before the announcement of exclusive negotiations between Safran and Zodiac. As a reminder, action Zodiac, which peaked at more than 35 euros in march 2015, has immersed when the setbacks in industrial broke out the day to reach 14 euros in February 2016, before rising back above 20 euros, with the first effects of the recovery measures. In its history, the Zodiac has not exceeded the threshold of 30 euros for 5 months.

The consequences of failure will be far-reaching for Zodiac

The consequences of a possible failure of this operation would not be the same for both industrial. Unlike Saffron, this approximation appears to be vital to Zodiac. Its management seems to agree. During the presentation of the approximation, indeed, it has been recognized that Zodiac could no longer remain alone.

This market is tough, very competitive, very demanding on the time, quality, innovation and price. The crisis of growth that we have experienced in the last 18 months has clearly confirmed ! We, the shareholders and managers of the Zodiac, have therefore thought that the time had come to lean against a group of powerful, strong, rich human resources, technological and financial. The choice of Saffron is needed“, said Didier Domange, chairman of the supervisory board of Zodiac Aerospace.

The moment of truth is scheduled for the summer since the TAKEOVER is expected to be launched in August. To do this, it must first receive an opinion of the staff representatives and the fire of the competition authorities. It is expected by the summer. Seen that there is very little overlap of activity between the two industrial, the case should in fact go quite fast.


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