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PARIS (Reuters) - Pressure on France's Safran (SAF.PA) to rethink its proposed $9 billion takeover of Zodiac Aerospace (ZODC.PA) intensified on Wednesday as a profit warning sent the target's shares tumbling and hedge fund TCI called for Safran's chairman to be ousted unless it abandons the deal.
Zodiac shares were down 16 percent at 23.07 euros by 1259 GMT, well below Safran's offer price of 29.47 euros. Safran shares were down 0.6 percent.
Paris-based Zodiac disclosed new cost overruns and slashed its earnings guidance late on March 14, with the manufacturer of aircraft interiors saying it expects annual core operating income to fall by about 10 percent, against a previous forecast of a 10-20 percent increase.
The latest profit warning resulted from problems at its Zodiac Seats UK division, but the company said the setback did not alter its goal of returning to historical levels of profitability by 2019/20.
Aircraft engine and parts maker Safran reaffirmed its interest in buying Zodiac, emphasizing confidence in its ability to reinvigorate the company.
Nevertheless, investor TCI -- which owns about 4 percent of Safran and is also a shareholder of Zodiac -- said in an open letter to Safran chairman Ross McInnes that it would urge shareholders to oust him unless the takeover is abandoned.
"If you do not cancel the deal it will be clear evidence that you are not competent to continue as chairman of Safran, so we will call on Safran shareholders to remove you from the board at the AGM in June," TCI wrote.
Safran said it had no comment to make on TCI's letter.
TCI has repeatedly questioned the reliability of Zodiac's 2019-20 targets after a two-year industrial crisis and multiple profit warnings.
Safran insists that it can secure Zodiac's 2019/20 goals, which are key to the deal's valuation, by using its greater industrial clout to improve efficiency and drive down costs.
However, one trader said that Safran might have to cut its offer price, while Raymond James analyst Harry Breach lowered his estimate of the probability of the deal going through to roughly 60 percent from 75 percent.
Additional reporting by Vikram Subhedar; Editing by Matthias Blamont and David Goodman