(News Bulletin 247) – The company confirmed on Monday evening that it was in discussions to potentially take over certain flight control and actuation activities from Raytheon Technologies. This could be its biggest acquisition since Zodiac five years ago.

Will Safran make its biggest acquisition since the takeover of Zodiac Aerospace, finalized in 2018 for just under 9 billion euros?

The aeronautical equipment and engine manufacturer has in any case confirmed that it has spoken with Raytheon Technologies to buy certain activities. This American group brings together Collins Aerospace, which specializes in mechanical systems, interior equipment, avionics and aerostructures, as well as Pratt & Whitney. The latter company is an engine manufacturer and direct competitor of CFM International (the joint venture of Safran and General Electric) to equip the Airbus A320 neo family.

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More specifically, Safran has entered into discussions with Raytheon for the potential acquisition of certain flight control and actuation activities of the American group “as part of a competitive process”, the company announced in a press release published Monday evening.

“At this stage, it is not possible to assess the possibility of the outcome of these discussions or to specify the terms of a possible agreement. If necessary, precise information on the elements of a possible transaction would be communicated. in a timely manner,” the company added in its brief communication.

Towards a transaction of more than 1 billion dollars?

Safran actually came out of the woodwork after Bloomberg previously reported that the group was negotiating “final terms” for a deal with Raytheon. Citing sources familiar with the matter, the American press agency mentioned a potential amount of around 1 billion dollars. Private equity funds would compete with Safran, again according to Bloomberg.

In a note published Monday evening, Jefferies warns that the Raytheon flight control and actuation businesses targeted by Safran have potentially low margins with little “aftermarket” activity. everything that constitutes after-sales services (maintenance, overhaul, repairs or even sales of spare parts), which the investment bank considers to be negative elements.

Jefferies also points out that any external growth operation could compete with potential share buybacks, and therefore return to the shareholder.

For the time being, the Safran share is not really picking up, yielding 0.2% to 136.94 euros around 11 a.m.

Asset rotations

It should be remembered that Safran – even if it does not communicate its margins in this area – achieves a huge part of its profitability in these so-called “aftermarket” services, particularly at the level of CFM International’s previous engine, the CFM56, the engine best-selling in the world.

This also explains why Safran’s share is much more dependent than that of Airbus on the level of air traffic, increased use of aircraft being synonymous with more visits to the company’s workshops for “aftermarket” .

The company headed by Olivier Andriès is currently carrying out major asset rotations. It has sold or signed sales agreements representing a total of 400 million euros since last year, which includes, for example, its emergency shutdown systems for military aircraft, and safety control systems and parachute launch and release platforms.

On the other hand, the company has acquired or is in the process of acquiring activities for a total amount of 650 million euros. Safran, for example, acquired in July 2022 Orolia, a company specializing in technologies and equipment related to positioning, navigation and precise time. More recently, it finalized the takeover, alongside Airbus and Tikehau Capital, of Aubert et Duval, a supplier of critical materials and parts for aeronautics, from the mining company Eramet.