Safran to acquire Collins Aerospace actuation, flight control business

Safran (SAFRY) announces the contemplated acquisition of Collins Aerospace’s (RTX) high-technology actuation and flight control activities, which are mission critical for commercial & military aircraft and helicopters. The business has around 3,700 employees across eight facilities in Europe and in Asia, and also benefits from MRO and engineering capabilities. It is expected to generate sales of approximately $1.5B and an EBITDA of $130M in 2024. The transaction is expected to generate approximately $50M of annual pre-tax run-rate cost synergies, which would be progressively implemented from 2025 to 2028. Such synergies would come from economies of scale in procurement, R&D complementarity, internalization of sourcing and production flows. In addition, commercial synergies would be obtained through integrated offerings and a diversification of customers and geographic mix. Commercial synergies would continue post 2028 with run-rate achieved on next-generation aircraft by the middle of the next decade. The enterprise value of $1.8B would represent a multiple of approximately 14x pre-cost synergies and 10x post run-rate cost synergies based on 2024E EBITDA, with an expected IRR and ROCE 2028E of the transaction exceeding the Group’s WACC and with an accretive impact on Safran earnings per share from year one. As part of the contemplated acquisition, long-term supply agreements would be secured between Safran and Collins. The transaction is expected to be fully financed with available cash, with a limited impact on the group’s net leverage and a reiterated commitment to the group’s investment grade rating. The contemplated transaction is subject to the information and consultation procedure with the relevant employee representative bodies of Collins and Safran, as well as the customary regulatory approvals and closing conditions. Closing is expected to take place in the course of H2 2024.