Zodiac S.A.

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Zodiac S.A.

2 rue Maurice Mallet
92137 Issy-les-Moulineaux
Telephone: (+33) 1 41 23 23 23
Fax: (+33) 1 46 48 83 87
Web site: http://www.zodiac.fr

Public Company
1897 as Société Mallet, Melandri et de Pitray
Employees: 6,500
Sales: FFr 5.49 billion (US$891.1 million) (1999)
Stock Exchanges: Paris
Ticker Symbol: ZODFF (OTC)
NAIC: 33641 Aerospace Product and Parts Manufacturing; 326199 All Other Plastics Product Manufacturing

Zodiac S.A. of France is a world-leading manufacturer of parts and equipment for the aeronautics, airline equipment, and marine-leisure industries. The companys inflatable boats repre-sent more than 40 percent of the worldwide market, a segment the company itself pioneered as early as the 1930s. Through a long list of acquisitions, Zodiac has built itself into a diversified operation with leadership status in such niche product areas as aircraft escape slides, parachute systems, helicopter floats, and flexible fuel tanks (Aeronautics Equipment division); passenger seats and on-board toilets and sanitation systems (Airline Equipment); inflatable boats and rescue rafts, above-ground swimming pools, and related equipment; and inflatable toys (Marine-Leisure). Zodiacs customers include Airbus, Boeing, various departments of defense, and most of the worlds civil airlines. The company generates the majority of its sales (64 percent) through the civil aviation sector, including some 28 percent of sales from its aircraft seating operations alone. Zodiacs inflatable boats continue to provide some 13 percent of sales, however, and have made the Zodiac brand name known throughout the boating world. That world has increasingly leaned toward North America, which accounted for 54 percent of Zodiacs sales in 1999. French sales accounted for 17 percent of the companys revenues. The chief architect of Zodiacs growth from a small single-product company in the late 1970s to a diversified manufacturer and distributor with nearly FFr 5.5 billion in annual sales is Chairman and President Jean-Louis Gerondeau. A public company that helped initiate Pariss secondary market in the early 1980s, Zodiac continues to be controlled by its founding families, which hold 30 percent of the companys shares and some 40 percent of voting rights. This position helps to protect the company from the possibility of a hostile takeover.

Aviation Pioneer in the 19th Century

Zodiac was born out of the pioneering efforts of the worlds earliest aviators, as the dream of flying became a reality toward the end of the 19th century. Hot-air ballooning, first developed early in the century, remained primarily an adventurers pastime in France in the late 1870s, when Maurice Mallet took his first balloon flight. Mallet became friends with one of the countrys most well-known balloonists, Paul Jovis, and together Mallet and Jovis founded the Union Aeronautique de France to develop new ballooning and aeronautics techniques and equipment. Mallet took over the flying of the associations balloons after Joviss death in 1891 and became world-renowned when he broke the record for the longest balloon flight, flying from Paris to Walhen, Germany, over three days in 1892.

These and other ballooning triumphs helped spark a surge of popular interest in ballooning at the end of the century, and Mallet and two friends formed the partnership Société Mallet, Melandri et de Pitray to open a ballooning park in Pariss Bois de Boulogne in 1897. The company quickly turned to manufacturing balloons for others and was renamed Ateliers de Constructions Aeronautiques Maurice Mallet to emphasize its new direction in 1899.

Mallets company grew along with the interest in aviation then sweeping France. While others pursued developments of so-called heavier-than-air craft, Mallet continued to research designs in lighter-than-air craft, developing new fabrics and technologies and then turning to the construction of dirigibles as well. For this, Mallet formed a new company, the partnership Société Française des Ballons Dirigeables in 1908.

Mallet introduced the prototype for a new type of foldable, dirigible balloon that was easy to transport and set up. Targeted not simply to private ballooning enthusiasts, but also to the business sectorfor use as an advertising mediumMallet introduced the first Zodiac collapsible balloon in 1909. At the same time, Mallet also put into place an international sales network, through a system of agents located in the United States, Japan, Canada, and the former Austro-Hungarian empire. In that year, Mallet changed his companys name again, now to Société Française des Ballons Dirigeables et dAviation Zodiac.

The addition of Aviation to the companys name signaled its growing interest in heavier-than-air craft, and in 1909 Mallet built its first biplane, for French aviator Maurice Farman. By the outbreak of World War I, Mallets original workshops had been transformed into full-fledged manufacturing facilities. The company was called to support the war effort, focusing its attention wholly on balloon and dirigible craft for the French war effort. When balloons proved impractical as bombing craft, Mallet opened a second facility for airplane manufacturing, turning out more than eight airplanes each month by the end of the war.

Yet the end of the war meant the sudden loss in defense contracts, leaving the company in a precarious financial position. The company began to branch out from aeronautics for the first time, adding its first marine productspatrol boats for the French navyin the 1920s. Meanwhile, the company continued to develop its lighter-than-air craft, introducing a semi-rigid dirigible in 1930.

Soon after, Zodiacs expertise in inflatable fabrics, techniques, and materials led one of its engineers, Pierre Debroutelle, to begin work on developing other types of craft. In 1934, Debroutelle finished a small inflatable kayak. The prototype caught the attention of the French navy, which commissioned Zodiac to build an inflatable boat capable of carrying torpedos and other bombs.

Zodiacs participation in the French war effort sent the company underground during the Nazi occupation of France during World War II. Nonetheless, Debroutelle continued experimenting in secret on his inflatable boat concept using scrap materials. Meanwhile, the invention of outboard motors during the war years gave new possibilities to Debroutelles designs. In 1946, Zodiac debuted the first of its U-shaped Zodiac boats.

Postwar Leisure Leader

The appearance of the jet engine during the war years turned public attention away from dirigible craft. Zodiac continued to manufacture balloons and other craft, primarily for advertising uses. To generate revenues, the company diversified into the manufacture of other products, including a line of office furniture and manure spreaders. Although the company continued development of its inflatable boat designs, its sole market for this craft came from the defense industry, which adopted Zodiacs inflatable for life rafts. Doubts about the Zodiac de-signs seaworthiness were dispelled by several voyages made by Alain Bombard in the Zodiac Mark III. The company quickly gained the leading position as a supplier of life boats and other rescue craft in France.

The postwar economic boom, and the rise of an entirely new phenomenonthe so-called leisure marketwere to transform Zodiac. With both time and money on their hands, French consumers turned toward new leisure activities, and boating be-came a popular past time. The Zodiac boats quickly captured a leading share of the new market for inflatable leisure craft. The company also gained new recognition when famed sea explorer Jacques Cousteau commissioned the company to build the Amphritrite. Meanwhile, the company was branching out into the burgeoning aerospace industry, designing special measuring balloons for the French CNES space research center. The company, which simplified its name to Zodiac S.A. in 1965, also moved to establish itself on the international market, launching the partnership Zodiac Espanola S.A. in Spain. The company took full control of this subsidiary in 1968, before forming a subsidiary in the United States, in Annapolis, Maryland, two years later. By then, Zodiac had captured the leading position in the inflatables market in France and had taken a place among the worlds leading manufacturers of inflatable boats. The companys growing participation in the aerospace industry led to the creation of a dedicated subsidiary, Zodiac Space. Yet the companys primary product remained its leisure boating range.

The downturn of the world economy, following the Oil Embargo of 1973, nearly brought Zodiac to bankruptcy. As the companys focus had increasingly narrowed around its boating products, the company was especially hard hit by the collapse of the leisure market, as consumers weathered a new inflationary period. Recognizing the need to take the company into new directions, Zodiac brought in a new management team, led by Jean-Louis Gerondeau as chairman, in 1973.

Company Perspectives

At Zodiac, our goal is to provide safety and performance in the air and in water. To master these challenging elements, we have consistently focused our entire business on: a global growth strategy to broaden our offering and seek out new synergies; creativity and innovation to optimize products and deliver the best possible; listening to our customers in order to understand the needs of our varied corporate and consumer markets; strict quality control in manufacturing to ensure compliance with the toughest standards; rigorous management methods to give our shareholders the high returns they are entitled to expect.

Gerondeau initially sought to diversify the company into other sports leisure categories, building on the Zodiac brand name, while protecting itself from the seasonal nature of its core boating market. The company proved unable to find a suitable acquisition target, however, and instead placed its efforts into enhancing its international network. In 1977, the company established a Greek subsidiary, Zodiac Hellas, following that with an implantation in Italy in 1978, through Zodiac Italia, and then Germany, with the opening of its Zodiac Deutschland subsidiary in 1979.

Diversifying for the 21st Century

That same year brought Zodiac a new opportunity for diversifying its operations. Yet the companys acquisition of Aerazur, which had been a rival dirigible maker between the world wars, took Zodiac away from its sports leisure base. Whereas Zodiac had concentrated on inflatable boats after World War II, Aerazur had turned to the manufacture of aeronautic fabrics. The merger of Aerazur into Zodiac proved more than complementary, since the two companies were able to take advantage of each others expertise and technology. With Aerazur, Zodiac turned toward the aerospace marketa segment that later accounted for two-thirds of the companys sales.

Zodiac quickly moved to boost its new aeronautics division, acquiring two more French companiesEFA, Bombard-LAngeviniere in 1980, as well as a major share in Sicma, a leading maker of airplane seats. The company also bought up Sevylor, then Europes leading inflatable products manufacturer, in 1981, adding that companys range of inflatable toys, rafts, and boats. The following year, Zodiac once again strengthened its international presence, opening subsidiaries in Holland and the United Kingdom. By 1983, eager to continue its acquisition drive, Zodiac went public, becoming the first company to receive a listing on the new secondary market (the French version of the OTC) launched by the Paris bourse. In that year the company posted annual sales of FFr 709 million.

By the middle of the 1980s, Zodiac, which had risen to the leading ranks in the French domestic market, was prepared to raise its international profile. The company began a series of foreign acquisitions that were to transform the company from a small French corporation to one of the leaders in its marketswith the bulk of its sales coming from North America. The first step toward this transformation came in 1987, when the company acquired Air Cruisers of Belmar, New Jersey. The following year the company took the still bigger step of acquiring Pioneer Aerospace Corporation, based in South Windsor, Connecticut. Zodiac also had been enhancing its operations in Canada. After establishing its own distribution subsidiary, Zodiac Inflatable Technologies, in Toronto, the company moved to take over all of its Canadian distribution activities, acquiring the formerly independent company Zodiac Marine Ltd. in 1987, before taking majority control of chief Canadian competitor Hurricane Rescue Craft Inc. These three Canadian operations were merged into a new Zodiac subsidiary, Zodiac Hurricane Technologies Inc. in 1991.

The following year, Zodiacs acquisition of Weber Aircraft Inc., with operations in Texas and California producing airplane seating, helped consolidate the companys newest division, that of Airline Equipment, firmly establishing the companys presence in that market. Raising its stake in Sicma Aero Seat to 100 percent that same year also boosted the Airline Equipment division and made the company one of the worlds leaders in that sector.

Zodiacs diversification as well as its growth on the international front helped protect it from the crisis that rocked the aerospace industry in the early 1990s. The worldwide recession, the end of the Cold War, shrinking defense budgets, and a collapse of the airline passenger market due to hostilities sur-rounding the Persian Gulf War had combined to cripple the aerospace industry. The companys sales and profits continued to grow, and by the mid-1990s, when the aerospace sector rebounded, the company showed double-digit growth, reaching annual sales of FFr 3.4 billion and net profits of FFr 201.7 million in 1995.

By then, the companys leisure-marine operations, which received a boost with the acquisition of swimming pool equipment manufacturer Fountainhead Technologies, accounted for only about 40 percent of its sales. Aerospace and airline equipment had reached 68 percent of sales, in time for a new boom in the industry, as passengers once again returned to the skies and airlines returned to enhancing their fleets. In 1998, Zodiac turned its interest to a new area of the airplane, when it acquired MAG Aerospace, a leading maker of toilets and sanitation systems for airplanes. That same year, the company acquired long-time rival Avon Inflatables Ltd., giving the company a commanding position in the United Kingdoms inflatable marine products category.

Key Dates

Maurice Mallet and Paul Jo vis establish the Union Aeronautique de France.
Mallet forms the Société Mallet, Melandri et de Pitray in Paris.
Company is renamed Ateliers de Constructions Aeronautiques Maurice Mallet.
Mallet establishes the Société Française des Ballons Dirigeables; introduces collapsible dirigible.
Company changes name to Société Française des Ballons Dirigeables et dAviation Zodiac; builds first biplane.
Company introduces V10 semi-rigid airship.
Prototype for first inflatable boat is developed.
Company introduces U-shaped Zodiac inflatable boat.
Begins manufacturing lifeboats.
Opens first foreign subsidiary, Zodiac Espanola S.A. in Spain.
Company simplifies name to Zodiac S.A.
New subsidiary Zodiac Space is formed; company launches Zodiac of North America.
Jean-Louis Gerondeau takes over as company chairman.
Zodiac is listed on Pariss secondary market.
Company establishes Zodiac Hurricane Technologies Inc.
Zodiac reorganizes aeronautics operations into Zodiac Aerospace.

In the mid-1990s, Zodiac made its first moves to diversify beyond the aerospace and marine markets and into the automo-bile market. The rising demand for airbag systems for automobiles represented an opportunity for Zodiac, with its longstanding expertise in inflatable products. As such, the company set up its own air bag manufacturing operations under its Aerazur subsidiary. By the end of the decade, Zodiacs air bag operations had already reached sales of more than FFr 350 million.

Zodiac continued to make new acquisitions at the centurys close. In 1999, the company acquired Nautive, the leisure life raft division of Germanys Autoflug, further strengthening Zodiacs worldwide leadership position in inflatable boats. Later in 1999, Zodiac added to its aeronautics operations when it acquired Frances Intertechnique SA.

The Intertechnique acquisition prompted the company to reorganize its aeronautics operations into the newly named Zodiac Aerospace subsidiary. Formed in June 2000, Zodiac Aerospace was composed of three divisions: Aero Safety Systems; Airline Equipment; and Aircraft Systems. The Intertechnique acquisition helped raise the companys revenues to nearly FFr 5.5 billion and solidified Zodiacs transformation from a pioneer in air transport to one of the 21st centurys major aeronautics manufacturers.

Principal Subsidiaries

Aérazur; Air Cruisers Company (U.S.A.); Amfuel (U.S.A.); Avon Inflatables Ltd. (U.K.); Barracuda South Africa; DEC (Canada); Mongram Sanitation (U.S.A.); Muskin Leisure Products Inc. (U.S.A.); Plastriemo; Parachutes de France; Pioneer Aerospace Corporation (U.S.A.); Sevylor International; Sicma Aero Seat; Sicma Aero Seat Services Inc. (U.S.A.); Weber Aircraft Inc. (U.S.A.); Zodiac Espanola SA (Spain); Zodiac Group Australia Pty Ltd.; Zodiac Hurricane Technologies (Canada); Zodiac International; Zodiac Italia; Zodiac-Kern GmbH (Germany); Zodiac Pool Care, Inc.

Principal Competitors

K & F Industries, Inc.; B/E Aerospace, Inc.; Buderus.

Further Reading

Fainsilber, Denis, Apres le rachat dIntertechnique, Zodiac prevoit un nouveau bond de ses benefices, Les Echos, March 12, 1999, p. 20.

______, Zodiac porte par la reprise des commandes davions, Les Echos, December 16, 1996, p. 11.

Fay, Pierrick, Interview: Jean-Louis Gerondeau, Journal des Finances, October 2, 1999.

Levi, Catherine, Jean-Louis Gerondeau: Nos diversifications doivent rester coherentes, Les Echos, November 3, 1998, p. 50.

M. L. Cohen