Rockwell deal to buy B/E Aero rekindles speculation over Zodiac

PARIS (Reuters) - Shares in French aircraft seats maker Zodiac Aerospace rose sharply on Monday after U.S. rival B/E Aerospace agreed to be bought by Rockwell Collins for $6.4 billion (5.23 billion pounds). The move to create a new aerospace supplier with revenue of more than $8 billion (6.54 billion pounds) breathed new life into the concept of combining aircraft interiors with providers of systems and connectivity, as planemakers shift towards smarter cabins. However, some analysts questioned the synergies involved in the purchase of B/E Aerospace, suggesting it could also be a partly defensive move as aerospace merger activity picks up. Shares in Zodiac Aerospace rose as much as 4 percent and were briefly the second-top gainer in France's SBF 120 Eclaireur index. At 0917 GMT the stock was up 2.3 percent at 21.945 euros. Rockwell Collins said on Sunday it had agreed to buy B/E Aerospace, one of the aircraft industry's largest cabin interior makers alongside Zodiac, for $62 a share, or $6.4 billion plus the assumption of $1.9 billion in debt. A Paris-based analyst, asking not to be identified, said the deal raised bid speculation around Zodiac, with the two most likely candidates to acquire it being France's Safran and U.S. conglomerate United Technologies . Safran made an informal attempt to buy Zodiac in 2010 but was rebuffed by Zodiac's family shareholders. Sources familiar with the matter recently denied reports that Safran was considering a fresh approach as it focuses on a steep production ramp-up in its main engines business. NOT FOR SALE Other top suppliers seen as keen to expand include Honeywell , which failed to grab United Technologies this year. Zodiac Aerospace management have repeatedly said the company is not for sale. Rockwell Collins said the B/E deal would expand its scale. "Our tentative conclusion from this language is that the rationale is one of scale and product breadth, aftermarket mix enhancement, and finally product synergy," Raymond James analyst Harry Breach said in a note. The deal increases Rockwell Collins' exposure to a record pipeline of commercial aerospace equipment purchases and boosts its relatively limited exposure to lucrative aftermarkets. However it leaves the combined company vulnerable to any reduction in aircraft production plans as the aerospace cycle enters a slowdown, ending several years of record orders. Analysts cautioned those considerations would also have to be weighed in any bid for Zodiac. Others noted Zodiac is pricier than competitors as investors factor in a recovery from recent industrial problems. Its current share price implies an enterprise value of 24 times earnings before interest, tax, depreciation and amortisation, or almost twice the multiple of 12.6 times forecast 2017 earnings being paid for B/E, according to Thomson Reuters data. "We'd be surprised if B/E Aerospace receives a higher offer given the full price (and) concerns about widebody aircraft delivery rates," Cowen & Co analysts said in a note. (Reporting by Tim Hepher and Alan Charlish; Editing by David Holmes)