Paris Air Show

Snecma plus Sagem equals Safran

 - December 15, 2006, 11:19 AM

Snecma, the leading French aerospace engine and equipment-manufacturing group is no more. A series of moves has transformed it from the government-controlled producer of the successful CFM aircraft engines with General Electric of the U.S. into a private undertaking that last month merged with telecommunications group Sagem to form Safran.

Jean-Paul Béchat, since 1996 Snecma chairman and CEO and now Safran chairman, agrees the merger is “atypical” but insists on the “synergies that exist between the two companies.”

Béchat declared on Friday that Safran is “not interested” in purchasing Dassault’s proposed sale of its 5.7-percent stake in Thales, the French defense electronics group. “We invest our cash in our own operations and do not want to be a shareholder among others. We do not have a vocation as financiers,” he told a Paris press conference.

The merger eliminates from the Safran stakeholding General Electric whose successful 50:50 partnership with Snecma for more than 30 years has produced the CFM56 turbofans for Airbus and Boeing narrow-bodied aircraft. Snecma derives about a third of its revenue from CFM International. In December, the U.S. manufacturer confirmed its long-term interest in buying into Snecma with an official offer to the French government to buy 5 percent of the newly merged Safran. Béchat considered the GE stance as “nonaggressive and even friendly” but the French government refused.

The apparently strange tie-up between engine maker Snecma defense electronics and telecommunications group Sagem was effected very rapidly. Announced on October 29, 2004, Sagem’s purchase and share exchange offer was accepted on February 23 when it took 83.39 percent of Snecma’s capital and 84.27 percent of its voting rights. The French government, which held a 62.2 percent stake in Snecma, becomes by far the main single shareholder in Safran with 35.9 percent of its capital. The public holds 38.5 percent of the shares and Safran’s workforce, 19.1 percent–probably the highest employee shareholding of a company in France.

At the end of March, the merged group was renamed Safran following the successful public offer by Sagem for Snecma’s shares. The May 11 annual general and extraordinary meeting of the two companies’ shareholders approved the merger and the new name. The group chose the name, which means in French both a ship’s rudder blade and the spice, saffron, to suggest direction, guidance and the suggestion of international trade. Safran becomes Europe’s third largest civil and defense aerospace group behind EADS and BAE Systems and ahead of Thales. Headquartered at Snecma’s premises in Paris, Safran has a workforce of almost 56,200 in more than 30 countries including 40,700 in France. The group is split into four branches: aerospace propulsion, aerospace equipment, defense/security and communications. Snecma and Sagem subsidiaries retain their names and identity.

According to Béchat, the companies are complementary. He said that early discussions showed there is an increasing tie-up between Snecma’s mechanical expertise and Sagem’s electronic prowess. “Electronics are playing an increasing role in aircraft manufacture. For example, Snecma developed the electrical braking system for the Boeing 787 and Sagem will be working with Safran subsidiary Messier-Bugatti on the electronics for these systems.”

Engines, he added, are increasingly dependent on electronics. “Before the merger for each new program we had to seek an outside partner for the electronics side. Now, Sagem will produce electronic control cards for the engines. Similarly, until now, Sagem had no business with Boeing, a major Snecma client, and Snecma can now help Sagem become a Boeing supplier."