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R McInnes, Esq.

Chairman
Safran S.A.
2, Boulevard du General Martial Valin
75724 PARIS Cedex 15
France

14 February 2017

Dear Mr McInnes

TCI Fund has been a shareholder of Safran for five years. TCI Fund currently owns almost 4% of the
company. The purpose of this letter is to state our strong opposition to the takeover of Zodiac Aerospace
and to demand that Safran shareholders are given a vote on the merger before Safran proceeds with the
takeover. We also propose an alternative strategy for Safran.

We have a lot respect for Safrans CEO, Mr Petitcolin, and the rest of the executive management team. So
far the launch of the LEAP engine has gone well and the Security business has been sold for a good
price. This will increase Safrans focus on the aerospace engine business, a business that Mr Petitcolin
once said was the best business in the world. We agree. It has huge barriers to entry and Safran has a
strong market position, significant pricing power and generates very profitable and predictable
aftermarket revenues for 25 years. It is therefore inexplicable that you would want to dilute the quality
of Safrans business by buying an overpriced, troubled, Interiors business.

Safran is significantly overpaying for Zodiac. The hugely inflated price assumes a full recovery of Zodiacs
margins. After ten profit warnings, such a recovery is highly uncertain. Furthermore the lack of due
diligence that has been done in this area means there can be no confidence that a turnaround is
achievable.

In our opinion the fair value of Zodiac is around 20, which is way below the offer of 29.5 and so Safrans
shareholders will suffer massive value destruction.

The deal represents a terrible return on investment (ROI) for Safran. Even in a best-case scenario, with
Zodiacs margins recovering from 5% to 14%, the after-tax ROI would be only 6%, a long way below
Safrans cost of capital. At Zodiacs current level of profitability the ROI of the deal would be just 2%.

The deal will also encumber Safran with a huge amount of debt (approximately 7bn, over 2x
Debt/EBITDA). This will restrict the companys ability to invest in R&D and new products, thereby
threatening the future success of the company.

The CEO of Safran has also acknowledged that there are unknown and unquantifiable liabilities relating
to Zodiacs recent delivery of defective seats and cabins. There are potentially huge late-delivery penalties

7 Clifford Street, London, W1S 2FT Telephone: +44 (0) 20 7440 2330

TCI Fund Management Limited is a private limited company incorporated and existing under the laws of England and Wales
with registered number 08898250

Authorised and regulated by the Financial Conduct Authority


and warranty claims that Zodiac may have to pay in the future. It is imprudent, if not reckless, for Safran
to assume these liabilities.

We demand therefore that the board give Safran shareholders a vote on the merger before Safran initiates
the tender offer for Zodiac. The current deal is structured in a way that deliberately disenfranchises Safran
shareholders. The board has intentionally decided to hold the merger vote after a successful tender offer
because effectively it will force Safran shareholders to vote in favour of the merger even if they object to
the overall transaction. This is a cynical and outrageous attempt to force Safran shareholders to vote for
a merger they may not really want. We have written to the AMF today asking them to intervene.

If the tender offer is successful, Safran will own a majority stake in Zodiac, a publically-listed company
which also has a large family influence. This would not be a long-term sustainable corporate structure. To
avoid further value destruction Safran shareholders would be under huge pressure to approve the merger
(because Zodiacs share price would collapse if shareholders voted against the merger). The sequencing
has been designed specifically to ambush the public shareholders of Safran in an unethical manner. The
fact that the board has agreed to ransom the company and its shareholders in such a way is underhand,
unfair, unscrupulous and unbecoming of a company with such a long and impressive history of success.

If you think the transaction is compelling you should be prepared to argue your case and let the
shareholders have their say. They are the owners of the business and the providers of capital. If the deal
is so good, you should be confident it will be approved by a two-thirds majority. While TCI does not
support it, other shareholders may disagree with us. That is fine. Just let the shareholders have a free,
open and fair vote before acquiring the controlling stake in Zodiac.

If you refuse to give Safran shareholders a vote on the merger before launching the tender offer, TCI will
propose certain agenda items at the forthcoming AGM in June. One of these agenda items will be to ask
shareholders whether they will vote against the merger at the future EGM. If this item receives more
than 33.4% of the votes this will force you to withdraw the tender offer for Zodiac. It would not be credible
for you to continue with the tender offer knowing that more than 33.4% of the voting rights oppose the
merger.

If you do proceed with the tender offer, and it is successful, then at the subsequent EGM we will put
forward strong arguments why the merger should still be rejected. We calculate that the value
destruction from owning a majority stake in Zodiac would be less than in a full merger of the two
companies. Therefore Zodiacs reference shareholders should also want certainty that the merger will
happen before the tender offer is launched.

In the letter to the AMF we have outlined the reasons why the proposed deal structure is unfair to Safrans
and Zodiacs public shareholders. The public shareholders of Zodiac are not being given the proper
information they require before making a decision namely whether the merger with Safran will
proceed. Zodiac shareholders could receive cash, Safran shares or they could end up owning a hugely
devalued minority stake in Zodiac once Safran shareholders have rejected the merger. This is unfair. They
should know in advance the choice they are making.
7 Clifford Street, London, W1S 2FT Telephone: +44 (0) 20 7440 2330

TCI Fund Management Limited is a private limited company incorporated and existing under the laws of England and Wales
with registered number 08898250

Authorised and regulated by the Financial Conduct Authority


Also, Zodiacs public shareholders are not being offered the same deal as the reference shareholders. By
stating in advance that they will not accept the cash offer, the reference shareholders are shifting the
burden of acceptance onto the public shareholders who will be under huge pressure to accept the cash
offer. If they do not accept it, the deal will collapse. This makes the deal one-sided; stacked in favour of
the insiders who have negotiated the deal. The controlling Zodiac shareholders have abused their
position by making the acceptance of the cash offer by the public shareholders the condition for the
merger. This effectively forces the public shareholders to take the cash (and so pay tax) rather than elect
for Safran shares in a merger. The reference shareholders however have already stated they will elect to
take Safran shares, in order to avoid paying tax. This outrageous, preferential treatment of the insiders
should not be permitted by the French regulator.

Furthermore, it is clear the deal structure has been designed specifically to help the Zodiac family
shareholders avoid paying tax. It is disgraceful that you and the rest of the Safran board have agreed to
such an abusive and unfair deal structure simply to facilitate the blatant tax avoidance strategy of the
Zodiac family billionaires.

TCIs detailed analysis of the deal can be found at www.astrongerSafran.com. In summary, buying Zodiac
Aerospace is a bad deal for the following reasons:
1. There is no strategic rationale;
2. The synergies are questionable due to limited product overlap;
3. Safran is massively overpaying: Zodiacs fair value is 20;
4. Safran stock is materially undervalued (12x adjusted eps) so exchanging it for overvalued Zodiac
stock is hugely value destructive;
5. It results in a very high level of debt (debt = 7 billion, leverage guidance = 2.5x EV/EBITDA);
6. Eps accretion is dependent on a highly uncertain and optimistic turnaround of Zodiacs business;
7. It would dilute the quality of Safrans business because Zodiacs business is more fragmented, has
lower barriers to entry and faces more and increasing pricing pressure from Boeing and Airbus;
8. Safran would be exposed to Zodiacs potentially huge contingent liabilities (i.e. unquantifiable
penalties and future warranty claims for defective seats and cabins);
9. Safran has a terrible history of executing and integrating takeovers;
10. The return on capital of the deal is very low; well below Safrans cost of capital;
11. A merged Safran/Zodiac would have a lower growth rate, lower return on capital and lower free
cashflow conversion;
12. Safrans dividend could be vulnerable due to high leverage and Zodiacs liabilities;
13. Safrans public shareholders will suffer dilution of capital, votes and board seats.

In short, Safran will be significantly weaker if it merges with Zodiac and the high level of debt would
severely restrict the amount that Safran would be able to spend on future products, R&D and dividends.

A much better strategy would be to use Safrans cash to initiate a share buyback. While eps accretion is
a bad metric to evaluate a deal, Safran could achieve the same level of targeted accretion by using its cash

7 Clifford Street, London, W1S 2FT Telephone: +44 (0) 20 7440 2330

TCI Fund Management Limited is a private limited company incorporated and existing under the laws of England and Wales
with registered number 08898250

Authorised and regulated by the Financial Conduct Authority


to do an 11% share buyback. There are many compelling reasons why a share buyback would be much
better for Safran and its shareholders:
1. Double digit eps accretion guaranteed;
2. No execution risk;
3. Safran would maintain its superior business quality;
4. FCF/net income conversion would approach 100%;
5. The business would have a much higher growth rate and a higher return on capital;
6. Safran would have zero debt;
7. The dividend would be secure, and the payout ratio could be raised to 60%;
8. Massively value accretive because Safran stock is materially undervalued;
9. The stock would trade on a much higher multiple (20x PE);
10. Safran stock is worth 100 without Zodiac.

So to be clear, the Zodiac takeover is a bad deal for Safran and its shareholders. The vote on the merger
should happen before the takeover to give Safrans shareholders their rightful say. The outcome of the
vote would also give all Zodiac shareholders certainty that the merger will not fail after the takeover.

TCI will be voting against the merger and we will continue to make the case for other Safran shareholders
to reject the deal and petition the board to cancel the takeover and initiate a share buyback instead.

Yours sincerely

Sir Christopher Hohn

Chief Executive and Chief Investment Officer

7 Clifford Street, London, W1S 2FT Telephone: +44 (0) 20 7440 2330

TCI Fund Management Limited is a private limited company incorporated and existing under the laws of England and Wales
with registered number 08898250

Authorised and regulated by the Financial Conduct Authority