French aero engine maker Safran today launched a $9 billion agreed bid for seats manufacturer Zodiac Aerospace to create the world's third-largest aerospace supplier as the industry bulks up to tackle record high output plans.
The deal comes three months after Zodiac's rival B/E Aerospace agreed to be absorbed by Rockwell Collins.
It also comes six years after Zodiac's family shareholders rejected an approach from Safran, branding it "opportunistic".
The two have frequently been linked as suppliers combine technologies and services to support rising aircraft production.
However, some analysts have warned such a tie-up is risky as Zodiac recovers from a nearly three-year crisis in its factories that delayed Airbus and Boeing jet deliveries.
Safran's CEO Philippe Petitcolin said he was not worried about Zodiac's recovery from recent production and quality problems in its US seat manufacturing plants.
He also pledged not to let the deal distract Safran from development of new 'LEAP' engines for Airbus and Boeing.
Zodiac has persistently vowed to stay independent and scoffed at Safran's original approach in 2010, saying any tie-up would offer "very slight" synergies.
But after a series of profit warnings, its CEO Olivier Zarrouati said last March that Zodiac would be "receptive to any offer that is in the interests of the company".
Airbus said this month there were still some difficulties in cabin supplies for the A350, whose deliveries have been partly held up by problems with toilets supplied by Zodiac. Zodiac says it is on course for recovery.
Petitcolin said synergies could far exceed an initial estimate of €200m annually. He declined to give details of the impact on jobs or other cost savings.
Under the two-part deal, Safran will launch a cash offer worth €29.47 per share, a 26% premium to Wednesday's Zodiac closing price of €23.31.
The initial offer values Zodiac at just over €8.5 billion, based on Thomson Reuters data.
Zodiac's controlling family shareholders would not take up this part of the offer, but would instead fold their shares into a subsequent merger between the two companies, based on 0.485 Safran shares for each Zodiac share.
In addition, Safran's existing shareholders would receive a special dividend of €5.50 per share, worth a total of €2.3 billion euros, before the deal goes ahead.
The companies said the combination would boost earnings per share from the first full financial year.
Zodiac Aerospace is controlled by a group of families that owns 23.8% of the stock and 36.6% of the voting rights and an arm of the Peugeot family, which owns 5.2% of the shares and holds 7.3% of the voting rights.
The French state owns 14% of Safran and will remain a shareholder of the combined group under a pact with other core shareholders.
Zodiac Aerospace is one of two major suppliers of aircraft seats alongside B/E Aerospace.
The industry relies on demand for eye-catching interiors from airlines but has struggled to combine such one-off, customised projects with the factory pace and costs needed to keep up with a recent boom in jet orders.
Other top suppliers seen as keen to expand include Honeywell, which failed to grab United Technologies in 2015.
