TCI Safran Presentation 2017-02-27

Buying Zodiac Aerospace is bad for Safran
and bad for Safran shareholders

February 2017
TCI Client Services Team

Irteam@tcifund.com Private & confidential
US +1 212 468 1050 Intended solely for recipient
UK +44 20 7121 9413
Safran
Summary
Buying Zodiac Aerospace is a bad deal for Safran
Safran is massively overpaying for Zodiac
Safran is a high quality business and its stock is significantly undervalued
The merger with Zodiac will be hugely value destructive
The shareholder vote on the merger should take place before the takeover
Corporate governance at Safran is flawed and will be even worse after the merger
Safran shareholders should vote against the merger to secure strong corporate governance
A share buyback is better for Safran and better for its shareholders
Safran stock is worth 100 without Zodiac
The proposed deal structure disenfranchises Safran shareholders
-2-
Safran
Why buying Zodiac is a bad deal
No strategic rationale Dilution of Safrans high quality Propulsion business
Questionable synergies Accretion dependent on a highly uncertain and

optimistic turnaround of Zodiacs business
Safran is massively overpaying Very low return on capital
Safran has a terrible history of executing and Results in a very high level of debt
integrating takeovers
Safran will be exposed to Zodiacs Safrans public shareholders will be diluted

contingent liabilities for late and defective Capital: 75% 68%
seat and cabin deliveries Votes: 62% 52%
Board seats: 40% 30%
Zodiacs founding families, the Peugeot family, Fonds Strategique and the French State will sign a shareholders
agreement that, together with employees, will give them effective control of Safran
-3-
Safran
Safrans rationale for buying Zodiac is flawed
1. Entering some new areas in aerospace: diversification into a poor business weakens Safran
2. Strategic growth: the deal dilutes Safrans growth rate
3. Financial discipline: Safran is massively overpaying and giving away cheap Safran stock
4. Synergies: these are questionable due to limited product overlap
5. "Create a global aerospace leader: this is good for the French state but not for public shareholders
A ll quotes are from Safran c onferenc e c all 1 9 th J an 2 0 17
-4-
Safran
Zodiac is overvalued even on normalised earnings: fair value = 20
2016 Actual Normalised
Revenue 5.2bn 5.4bn
Reported margin 5%
Normalised margin: allowing for some recovery in Interiors

Previous peak margin adjusted down due to:
Higher complexity of business mix 10%
Increased competition from new entrants e.g. Recaro
More pricing pressure due to shift to Supplier Furnished Equipment
EBIT 260m 540m
EPS 0.50 1.30
Implied multiples at takeout price of 29.50: PE 59x EV/EBIT 18x PE 23x
Fair value PE multiple 15x Zodiac fair value 20
Sourc e: T CI analysis
-5-
Safran
Accretion guidance is highly optimistic
EPS accretion is dependent on a highly uncertain

and optimistic turnaround of Zodiacs Interiors Zodiac's Interiors margin required
business for double digit accretion
15% >12%
Double digit accretion requires
the margin at Zodiacs Interiors
A margin recovery from -1% to over 12% is not business to recover from -1% in
credible because Safran has: 10%
2017 to more than 12% in 2019
Done little due diligence in this area

No experience making seats and cabins
5%
A terrible track record in integrating acquisitions
0%
There is huge execution risk
-1 %
-5%
2012 2013 2014 2015 2016 2017 2018 2019
Sourc e: T CI analysis, as sumes 5 1% tender acceptance, margin rec overy includes s ynergies
-6-
Safran
The Return on Investment of the deal is very low
The takeover destroys value
Current margin Recovery margin TCI Best case
Zodiac Takeout Value 9.7bn 9.7bn 9.7bn
EBIT margin 5% 10% 14%
Zodiac EBIT 320m 540m 760m
NOPAT 230m 390m 540m
Return on Investment 2% 4% 6%
Sourc e: T CI analysis, Zodiac margin inc ludes synergies
-7-
Safran
Zodiac is facing serious financial difficulties
Ten profit warnings in two years
No sign of a recovery in its Interiors business
Very close to breaking its debt covenants
Change in the business model to Supplier Furnished Equipment (SFE) will significantly increase pricing pressure
Increasing competition from new entrants (e.g. Recaro)
The deal is a bail out of Zodiac to create a national champion
-8-
Safran
Buying Zodiac dilutes the quality of Safrans business
Safran Pro forma Safran/Zodiac
Safran has a far superior business. Dilution of high quality Propulsion business.
Defence 4% Defence 5%
Zodiac
Interiors 15%
Equipment 26%
Propulsion 46%
% of Zodiac 2019 (E)
profits Aero Systems 9% revenues
2015
Propulsion 70%
Equipment 25%
The Propulsion business has: Zodiacs business is more fragmented with:

Huge barriers to entry Low barriers to entry
A global monopoly/duopoly position More and increasing pricing pressure from Boeing and
Significant pricing power Airbus as the business moves towards Supplier Furnished
Equipment (SFE)
Very profitable and predictable 25-year cashflows
-9-
Safran
Safran is hugely undervalued
Safrans reported earnings do not reflect its true earnings power (due to current hedge rate of $1.24/)
Safran 2016 (E)
Revenue 17,500m
Reported EBIT (Safran hedged @ $1.24/) 2,500m
Reported EPS 3.90
EBIT adjustment for FX @ 1.10/ 700m
Real underlying EBIT 3,200m
Real underlying EPS 5.10
Safran EV/EBIT 9x
Safran PE 12x
Reported E PS is pre-Security sale. 1 c move in the $ = 5 0 m

-10-
Safran
Safrans financial position will be significantly weaker after merging with Zodiac
Net cash position post sale of Security Net debt after Zodiac deal
Guidance: 2.5x debt/EBITDA
2bn net cash

2 2
1 1
0 0
-1 -1
-2 -2
bn
bn
-3 -3
-4 -4
-5 -5
-6 -6
-7 -7
7bn net debt
-8 -8
-11-
Safran
Public shareholders capital and voting rights will be significantly diluted
Current Safran shareholding structure Safran/Zodiac shareholding structure
French state 14% French state 13%
Employees 11% Employees 10%
Zodiac reference
shareholders 10%
Public 75% Public 67%
Current Safran voting rights Safran/Zodiac voting rights
French state 22% French state 20%
Employees 16% Employees 13%

Public 62%
Public 53%
Zodiac reference
shareholders 14%
-12-
Safran
Public shareholders board representation will be diluted
The principal shareholders are dividing the board seats of the merged company amongst each other
Zodiacs reference shareholders will all gain board seats
Public shareholders currently own 75% of the capital but post-merger will have only 30% of the board seats
Current Safran Board Safran/Zodiac potential board
Number of seats % Number of seats %
Chairman & CEO 2 12 2 10
French state 3 18 4 20
Employees 5 29 4 20
Independent 7 41 6 30
Zodiac Reference Shareholders 4 20
17 20
Source: TCI analysis

Notes: Employees includes Club Sagem representative.
Safran/Zodiac board assumes employees and independent representatives lose one board seat each.
P18 of merger presentation: the board would comprise 20 members, including representatives of Zodiac Aerospaces reference shareholders
http://www.latribune.fr/entreprises-finance/industrie/aeronautique-defense/fusion-safran-zodiac-l-etat-gagne-un-administrateur-de-plus-au-conseil-de-safran-633649.html
-13-
Safran
Safran
Corporate governance at Safran is flawed
Double voting means the French state and employees control almost 40% of the votes
The Florange Law has produced a governance structure that lacks proper accountability and responsibility
French state 14%

French state 22%
Employees 11%
Capital Voting
structure rights
Employees 16%
Public 75%
Public 62%
-14-
Safran
Corporate governance will be even worse after the merger
The merger is a cynical attempt by the principal shareholders to take control of the company
The deal will dilute the capital, votes and board seats of public shareholders
Public shareholders will be vulnerable to further abuse if the merger goes ahead
The valuation of the stock will suffer
Safran now Safran/Zodiac
Public share of capital 75% 67%
Public share of votes 62% 53%
Independent board seats # 7 of 17 6 of 20
Independent board seats % 40% 30%
-15-
Safran
The Safran/Zodiac board will look similar to the board of Volkswagen
TCI, a long term shareholder of Volkswagen (VW), has been actively trying to improve the corporate governance at
VW (see the website www.TCIVWengagement.com)
Huge problems arise from poor governance
Poor governance breeds arrogance and complacency
Safran/Zodiac board Volkswagen Board
French State 4 Lower Saxony 2
Employees/unions 4 Employees/unions 10
Zodiac Family 2 Piech Family 2
Peugeot Family 1 Porsche Family 2
Fonds Strategique 1 Qatar 2
Independent 6 Independent 1
-16-
Safran
If institutional shareholders vote against the deal it can be stopped
Safran shareholder structure % capital % votes
French state & employees 25 38
Public shareholders 75 62
o/w Institutional shareholders 61 50

o/w US/UK 41 34
o/w French 10 8
o/w other 10 8
o/w index funds 5 4
o/w individual shareholders 5 4
o/w unidentified 5 4
Only 33.4% of votes are needed to stop the merger
-17-
Safran
TCI has been a shareholder of Safran for five years
Safran share price

70
60
50
Stock price increase

40 Feb 2012Dec 2016: 170%
30
20
Feb 2012
TCI initiates position at 25
10
2012 2013 2014 2015 2016 2017
TCI currently owns over 4% of Safran
-18-
Safran
TCI has a very positive track record of interaction with Safran
In October 2012, TCI sent a public letter to

Safrans CEO and CFO
In the letter TCI proposed that Safran should:

1. Review its capital allocation policy
2. Sell its stake in Ingenico
Subsequently Safran:
1. Sold its Security business for a good price
2. Sold its stake in Ingenico. The final 5%
stake was sold for 110 vs. the current Ingenico
share price of 78
The interaction had positive outcomes for Safran
-19-
Safran
TCI reiterates its proposals from October 2012
In the October 2012 letter TCI also proposed that Safran:
1. Should not make a bid for Zodiac, a company of lower overall quality than Safran. This deal has
questionable strategic rationale and limited synergic benefits. We oppose any new attempt to
take over Zodiac.making engines is a far superior business to making seats.
2. Increase the dividend payout ratio to 50% of profits. Safran has strong cashflow characteristics so this is
easily affordable. There would still be more than enough retained capital for reinvestment and R&D.
3. Not use the companys shares for any future transaction as long as they remain at such a depressed
valuation. At current prices buying back the companys shares would be, by far, the best
investment that Safran could make.
These recommendations still apply today
-20-
Safran
The market is sceptical about the takeover of Zodiac
Safran share price

70
65
Safran stock -10% since

deal announced reflects
60 massive value dilution and
huge execution risk
55
Jul 16 Aug 16 Sep 16 Oct 16 Nov 16 Dec 16 Jan 17
Sourc e: Bloomberg
-21-
Safran
The AMF should intervene
TCI has written to the AMF asking them to intervene:
The proposed deal structure disenfranchises Safran shareholders
Safran shareholders are effectively being deprived of their voting rights
Zodiac public shareholders are not being given the proper information they require before making a decision
(they could receive cash, Safran shares or they could end up owning a hugely devalued minority stake in
Zodiac)
Zodiac reference shareholders are being given a preferential deal to avoid paying tax
It is in the interests of all shareholders that the vote on the merger happens before the takeover
TCIs correspondence with the AMF can be found at www.aStrongerSafran.com
The rights of the public shareholders are being violated
-22-
Safran
Alternative strategy
Zodiac is an inferior business and Safran is paying a massive multiple
Giving away undervalued Safran stock for expensive Zodiac stock is hugely value destructive for Safran
High leverage will weaken Safran
Safran shareholders should vote against the merger
Instead, Safran should do a 3bn share buyback
-23-
Safran
Comparison of the two alternative strategies
Buying Zodiac 3 billion share buyback
EPS accretion dependent on a highly uncertain and Double digit EPS accretion guaranteed.
optimistic turnaround of Zodiacs Interiors business.
Zodiac's Interiors margin required

for double digit accretion
15% >12%
Double digit accretion requires
the margin at Zodiacs Interiors
business to recover from -1% in
2017 to more than 12% in 2019
10%
5%
0%
-1 %
-5%
2012 2013 2014 2015 2016 2017 2018 2019
Sourc e: T CI analysis, as sumes 5 1% tender acceptance, margin rec overy includes s ynergies
-24-
Safran
Results in a very high level of debt: Safran would have zero debt
Leverage guidance = 2.5x EV/EBITDA 2bn in cash plus over 1bn of FCF pa
Debt = 7bn
Vulnerable dividend due to high leverage Secure dividend
Lower FCF conversion due to high levels of capex FCF/Net income conversion would be approx. 100%
at Zodiac
Future cashflow will be used to pay down debt Future cashflow could be used for:
1. More R&D
Dividend payout ratio capped at 40% 2. Investing in new products
3. Higher dividends; the payout ratio could be
raised to 50-60%
-25-
Safran
Exposure to contingent liabilities Zero exposure to Zodiacs troubled seats and cabins
business and potential associated liabilities
Zodiac is exposed to unquantifiable penalties for
late deliveries and future claims for potentially
defective seats and cabins
There is significant risk that Zodiac faces huge

costs in the future to fix recently delivered
faulty products.
Once the deal closes Safran will be liable for

these payments
This will consume cash that Safran could have

used to invest for the future and in R&D
-26-
Safran
The takeover will be massively value destructive A share buyback would be massively value enhancing
It only covers Safrans cost of capital under highly Safran stock is hugely undervalued (12x adjusted
optimistic scenarios earnings)
Safran has a terrible history of executing and Zero deal risk

integrating takeovers
Dilution of key business metrics: Superior business model maintained:

Lower growth rate High growth rate
Lower return on capital High return on capital
Higher capital requirements Low capital requirements
-27-
Safran
Summary
Buying Zodiac will significantly dilute the quality of Safran would remain focused on the high quality
Safrans business Aerospace Propulsion business
A Safran/Zodiac combination would have: Safran would have:

Lower growth A much higher growth rate
A lower return on capital A higher return on capital
A high level of debt Zero debt
A vulnerable dividend due to high leverage A secure dividend
Sub-100% FCF conversion due to high levels of capex The potential for higher dividends
required at Zodiac 100% FCF conversion
Safran is massively overpaying for Zodiac Safran stock is very cheap
Zodiacs fair value is 20
The takeover will be hugely value destructive The buyback would be massively value enhancing
-28-
Safran
Safran stock is worth 100 with a share buyback
Buying Zodiac 3bn share buyback

Current Safran Lower quality business High quality business
share price High leverage No leverage
15x PE 20x PE
100
56%
upside
75
17%
64 upside
-29-
Safran
Conclusion
Safran is massively overpaying for Zodiac
The merger vote should take place before the takeover
Corporate governance at Safran is flawed and will be even worse after the merger
Shareholders should vote against the merger (only 33.4% of the votes needed to block it)
Safrans stock price is significantly undervalued so a share buyback would be hugely value accretive
Safran stock is worth 100 without Zodiac
TCI will be voting against the merger and proposing a 3bn share buyback
-30-
Appendix
Safrans stand-alone growth prospects are very strong
TCI Client Services Team

Irteam@tcifund.com Private & confidential
US +1 212 468 1050 Intended solely for recipient
UK +44 20 7121 9413
Safran
Safran

The aerospace engine
business is the best
CEO
business in the world.

-32-
Safran
Safrans Propulsion business has over 80% share of the narrow body market
CFM 100% market share

monopoly specification CFM 60% market share
10,000 duopoly specification
8,000
Engines in fleet
6,000
CFM
4,000
2,000
0
Boeing 737 Family Airbus A320 Family
CFM IAE
Sourc e: A scend
-33-
Safran
Growing CFM installed base
CFM fleet in service to grow by 4%+ annually over CFM fleet in service
the next decade 40,000
25,000 CFM56 engines in operation today
By 2025, 11,000+ engines expected to be

30,000
added to the fleet in service
Number of engines
20,000
10,000
2018(E)
2021(E)
1982
1985
2000
2003
2024(E)
1988
1991
1994
1997
2006
2009
2012
2015
CFM56 LEAP
-34-
Safran
Aftermarket profits will grow strongly
CFM deliveries
All of these engines not making profits yet
1,800
1,600
1,400
Number of engines
1,200
1,000
800
600
400
200
0
1989
1990
1994
1998
1999
2003
2007
2008
2012
1988
1991
1992
1993
1995
1996
1997
2000
2001
2002
2004
2005
2006
2009
2010
2011
2013
2014
2015
pre-1988
Sourc e: A scend, T CI analysis
-35-
Safran
Shop visit outlook
Maximum shop visit activity on CFM56 Worldwide CFM fleet shop visits
around 2025 4,000
CFM56 Gen 2 shop visit activity will grow by

50%+ over the next ten years
3,000
Number of visits
2,000
1,000
2022(E)
2023(E)
2024(E)
2025(E)
2016(E)
2017(E)
2018(E)
2019(E)
2020(E)
2021(E)
2012
2013
2014
2015
CFM56 LEAP
-36-
Safran
A huge wave of engines will need servicing in the next 15 years
CFM56 engine deliveries and maintenance shop visits

2,000
1,800 Engines Engines Engines Engines

on 4th on 3rd on 2nd on 1st
1,600 visit visit visit visit
Number of deliveries
1,400
1,200
1,000
800
600
400
200
2019(E)
2016(E)
2017(E)
2018(E)
2020(E)
1985
1988
1992
1995
1998
2002
2005
2008
2012
2015
1986
1987
1989
1990
1991
1993
1994
1996
1997
1999
2000
2001
2003
2004
2006
2007
2009
2010
2011
2013
2014
Sourc e: A scend, Bernstein analysis
-37-
Safran
Expected CFM56 spare parts growth
Aftermarket revenues will peak 70% above 2015 level
2x 3x
2007
2016
2019
2028
2010
2013
2022
2025
Sourc e: Safran SA
-38-
Safran
LEAP dominating new engine orders and commitments
LEAP (Safran)
A320neo 1,571 aircraft (55% market share)

CFM LEAP
737 MAX 3,129 aircraft (100% market share) 74%
737 MAX
Comac C919 517 aircraft (100% market share)
5,217 aircraft
C919
GTF (Pratt & Whitney) C Series
MC-21
A320neo 1,264 aircraft (45% market share)
CSeries 403 aircraft A320neo A320neo
MC-21 176 aircraft PW1000G

26%
1,843 aircraft
Sourc e: Safran SA
-39-
Safran
Propulsion EBIT margin will bottom in 2017
25%
23%
21%
19%
17%
15%
13%
11%
9%
7%
5%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
-40-
Safran
Equipment division: Leading positions in braking and landing markets
Wheels and brakes Landing gear & systems
#1 worldwide #1 worldwide
for carbon brakes for civil aircraft
Sales Sales
99% aftermarket share 43% aftermarket
Generally dual sourced 57% OE
Revenue based on fee per landing Generally single sourced
Carbon brakes replacing steel brakes OE sales to Airframers
Aftermarket sales to operators and MROs
Sourc e: Safran SA
-41-
Safran
Equipment division: Strong growth expected
Wheels and carbon brakes Landing gear & systems
Number of commercial aircraft fleet Commercial market (OE + aftermarket)

equipped with carbon brakes
200
150
Base 100 Base 100

2025(E)
2025(E)
2014
2014
Sourc e: Safran SA
-42-
Safran
Margins at other divisions forecast to grow 1% p.a. for the next 5 years
Aircraft equipment Defence
15% 15%
10% 10%
5% 5%
0% 0%
2016(E)
2017(E)
2018(E)
2019(E)
2020(E)
2016(E)
2017(E)
2018(E)
2019(E)
2020(E)
2015
2015
Sourc e: Safran SA
-43-
Safran
3 years of flat EBIT, before growth resumes in 2018
4,000
3,500
3,000
2,500
m
2,000
1,500
1,000
500
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Sourc e: T CI analysis, pre s ale of s ecurity
-44-
Safran
CAPEX peak in 2016
1,000
800
600
m
400
200
2019(E)
2020(E)
2016(E)
2017(E)
2018(E)
2015
Sourc e: Safran SA
-45-
Safran
Research and development spending peaked in 2014
2,000 2,100m
1,500 1,356m
m
1,000
500 495m
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016(E) 2017(E) 2018(E) 2019(E) 2020(E)
Capitalised R&D Total self-funded R&D Total R&D effort
Decrease of development spending as programs enter into service
Sourc e: Safran SA
-46-
Safran
Strong dividend growth
Dividend per share
1.38
1.20
1.12
0.96
0.62
0.50
0.38
2009 2010 2011 2012 2013 2014 2015
Sourc e: Safran SA
-47-
Safran
The French government stake has been falling
35%
30%
30%
27%
25%
French government stake
22%
20% 18%
15%
15% 14%
10%
5%
0%
Mar-15
Mar-13
Jan-13
Nov-13
Nov-15
Nov-16
Sale proceeds ($m) 600 1,200 1,200 800 350
Price () 35 46 63 69 63
Sourc e: Bloomberg
-48-
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terms and conditions in this disclaimer and disclosure statement. This document is not classified as a financial promotion.
TC I Fund Management Limited is authorised and regulated by the Financial Conduct Authority of the United Kingdom.The information and opinions contained in this
document are for background purposes only, do not purport to be full or complete and do not constitute investment advice. This document does not constitute or form
part of any offer to issue or sell, or any solicitation of an offer to subscribe or purchase any investment nor shall it or the fact of its distribution form the basis of, or be
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C ertain information contained herein may constitute forward-looking statements. Due to various uncertainties and actual events, including those discussed herein,
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-49-

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Buying Zodiac Aerospace is bad for Safran

and bad for Safran shareholders

TCI Client Services Team

Buying Zodiac Aerospace is a bad deal for Safran

Safran is massively overpaying for Zodiac

Safran is a high quality business and its stock is significantly undervalued

The merger with Zodiac will be hugely value destructive

Safran stock is worth 100 without Zodiac

The proposed deal structure disenfranchises Safran shareholders

Why buying Zodiac is a bad deal

No strategic rationale Dilution of Safrans high quality Propulsion business

Questionable synergies Accretion dependent on a highly uncertain and

Safran is massively overpaying Very low return on capital

Safran will be exposed to Zodiacs Safrans public shareholders will be diluted

Safrans rationale for buying Zodiac is flawed

2. Strategic growth: the deal dilutes Safrans growth rate

4. Synergies: these are questionable due to limited product overlap

A ll quotes are from Safran c onferenc e c all 1 9 th J an 2 0 17

Zodiac is overvalued even on normalised earnings: fair value = 20

2016 Actual Normalised

Revenue 5.2bn 5.4bn

Normalised margin: allowing for some recovery in Interiors

EBIT 260m 540m

EPS 0.50 1.30

Implied multiples at takeout price of 29.50: PE 59x EV/EBIT 18x PE 23x

Fair value PE multiple 15x Zodiac fair value 20

Accretion guidance is highly optimistic

EPS accretion is dependent on a highly uncertain

Done little due diligence in this area

The Return on Investment of the deal is very low

The takeover destroys value

Current margin Recovery margin TCI Best case

Zodiac Takeout Value 9.7bn 9.7bn 9.7bn

EBIT margin 5% 10% 14%

Zodiac EBIT 320m 540m 760m

NOPAT 230m 390m 540m

Sourc e: T CI analysis, Zodiac margin inc ludes synergies

Zodiac is facing serious financial difficulties

Ten profit warnings in two years

No sign of a recovery in its Interiors business

Very close to breaking its debt covenants

Increasing competition from new entrants (e.g. Recaro)

The deal is a bail out of Zodiac to create a national champion

Buying Zodiac dilutes the quality of Safrans business

Safran Pro forma Safran/Zodiac

The Propulsion business has: Zodiacs business is more fragmented with:

Safran is hugely undervalued

Safran 2016 (E)

Reported EBIT (Safran hedged @ $1.24/) 2,500m

Reported EPS 3.90

EBIT adjustment for FX @ 1.10/ 700m

Real underlying EBIT 3,200m

Real underlying EPS 5.10

Reported E PS is pre-Security sale. 1 c move in the $ = 5 0 m

2bn net cash

Public shareholders capital and voting rights will be significantly diluted

Current Safran shareholding structure Safran/Zodiac shareholding structure

French state 14% French state 13%

Employees 11% Employees 10%

Current Safran voting rights Safran/Zodiac voting rights

French state 22% French state 20%

Employees 16% Employees 13%

Public shareholders board representation will be diluted

Zodiacs reference shareholders will all gain board seats