Today Safran will be forced to declare its intentions over a possible bid for aerospace supplier Zodiac after the French financial market authority ordered the aero-engine and defence group to end the uncertainty by the end of this morning.
During the summer months of 2010 Safran made a series of public statements saying that it wanted to discuss a deal with Zodiac. This caused Zodiac shares to turn volatile.
If Safran decided to make a bid, an offer timetable would have to be worked out with the regulator at the soonest opportunity. If on the other hand it states clearly it does not intend to bid, it will be barred from making an offer for the next six months, unless market conditions change significantly.
So why the delay? Simply put, Safran does not want to launch a hostile bid, but any offer would have to be hostile. The Zodiac board remains firmly opposed to any deal with Safran. Moreover, in September, many of the group’s family shareholders agreed a pact not to sell their shares, effectively blocking 29.5% of the equity and 40.5% of the voting rights.
Safran argues that a combined company would be a far stronger global force supplying everything from engines to galleys and seats, which of course will ensure a combined company has products on just about all Boeing and Airbus aircraft.
It is likely that Safran will have to drop its interest, if it decides to go hostile on the bid then expect a messy war of words and entrenchment on both sides, in turn there will be a dip in the Safran share price. Is this distraction needed in this current marketplace? Safran would be better to step back and hire a consultancy to improve relations with Zodiac shareholders over time and pave the way for a future bit.