market folly

Sir Christopher Hohn's hedge fund firm TCI Fund Management has put together a campaign trying to block Safran's takeover of Zodiac.

TCI has owned Safran for 5 years and as of the date of the letter owned 3.87% of the company.  They also own a much smaller position in Zodiac.  Basically, they're looking for a shareholder vote on the merger in an attempt to stop it.

Hohn writes, "In our opinion the fair value of Zodiac is around €20, which is way below the offer of €29.5 and so Safran’s  shareholders will suffer massive value destruction. The deal represents a  terrible return on investment (ROI) for Safran. Even in a best - case scenario, with  Zodiac’s margins recov ering  from  5%  to  14%,  the  after - tax  ROI  would  be  only  6%,  a  long  way  below  Safran’s cost of capital. At Zodiac’s current level of profitability the ROI of the deal would be just 2%."

Embedded below is TCI Fund's presentation on Safran / Zodiac:


Also embedded below is Chris Hohn's letter to Safran:


You can view the rest of TCI's materials at the website they've established for their campaign: A Stronger Safran.

For more on this hedge fund, we've posted up Chris Hohn's presentation on Charter Communications from the Sohn London conference.