LONDON/PARIS (Reuters) - Hedge fund TCI Fund Management, locked in a war of words with Safran SA (PA:SAF) over the aerospace firm's proposed bid for Zodiac Aerospace SA (PA:ZODC), said on Thursday the company had no proof that its valuation of the deal made sense.
Safran, responding earlier on Thursday to TCI's criticisms of the deal, said its board had valued the offer at 13 times operating earnings based on Zodiac's recent margin guidance for 2019-20 and considered this to be in line with similar deals.
Commenting on the letter from Safran Chairman Ross McInnes, TCI said the valuation was based on fragile assumptions given a recent spate of Zodiac profit warnings and Safran's inability to carry out due diligence at Zodiac's aircraft seat factories.
"The multiple he is quoting, he has no certainty whatsoever that he will be able to achieve it. If Zodiac failed to achieve that multiple, why would he be able to achieve it?", Jonathan Amouyal, a partner at UK-based TCI, told Reuters in response to the rebuttal by Safran's McInnes.
Safran, a leading aero engine maker, says it can apply state-of-the-art project skills to ensure Zodiac hits its goals.
Amouyal cited a report by Bernstein analysts who valued the transaction at closer to 40 times operating earnings, among the sector's highest for a decade, based on current performance.
Safran says that Zodiac has to be valued on a medium-term perspective because it is in the midst of a turnaround.