Safran Says Purchase of UTC Unit Cuts Need for Decade of R&D

Safran SA (SAF), the French maker of aerospace components and jet engines, said its 310 million-euro ($400 million) acquisition of a power systems unit from United Technologies Corp. (UTX) eliminates the need for a decade of research and development efforts in the field.

“If we were to go it alone, we would have to spend considerable amounts on research and development and even then we would not have the credibility on our own,” Safran Chief Financial Officer Ross McInnes said on a call with analysts.

The in-house costs would have reached as much as 200 million euros over a decade, McInnes said. Safran is paying cash for Goodrich Electric Power (015760) Systems and expects the deal to close by early 2013, the Paris-based company said. Antitrust regulators forced United Technologies to sell the unit after it took over the parent company.

Safran turned to Goodrich Electric after a failed takeover approach for French aircraft systems maker Zodiac Aerospace (ZC) two years ago. It’s betting that electrical systems will become increasingly important in commercial aircraft as Boeing Co. (BA) and Airbus SAS look to build lighter, more fuel efficient planes. Safran is unlikely to renew interest in Zodiac, Morgan Stanley analyst Rupinder Vig said.

“The trend towards more electrical aircraft is a long term irreversible industry evolution which opens up new opportunities for our industry,” Safran Chief Executive Officer Jean-Paul Herteman said in a statement.

GEPS is expected to generate more than $200 million in revenue this year. The Pitstone Green, England-based company employs around 560 people, including staff at its Twinsburg, Ohio facility. The unit is delivering low-single digit margins,and McInnes said a management plan should boost profitability over the next few years.

Safran rose as much as 2.4 percent and was trading up 2 percent at 30.29 euros at 2:47 p.m. in Paris.

To contact the reporter on this story: Robert Wall in London at rwall6@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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