In an unexpected turn of events, Boeing Co. has agreed to acquire Spirit AeroSystems Holdings Inc. for a total value of $4.7 billion, according to insiders who have knowledge of the transaction. Boeing’s offer of $37.25 per share in an all-stock deal and the assumption of Spirit’s $3.5 billion debt is set to make waves in the aviation industry.
The deal, which could be made public as early as Monday, is part of Boeing’s larger plan to take control of Spirit’s manufacturing, including the building of frames for its 737 Max, a significant revenue generator for the company.
Details of the Deal
As part of the agreement, Boeing will also take over a portion of Spirit’s defense contract work. Concurrently, Airbus SE, Boeing’s main competitor, is expected to announce its control over some of Spirit’s factories manufacturing structures and components for its commercial aircraft. The specifics of this transaction, however, have not yet been disclosed.
The move to reintegrate Spirit comes after an accident in January involving a 737 Max-9 airliner revealed critical shortcomings in both quality and manufacturing at Boeing and Spirit, leading to a reassessment of their relationship.
Financial Implications and Challenges
Both Boeing and Spirit have faced mounting financial pressure and scrutiny since the accident. The incident, which involved a door-shaped panel on a 737 Max 9 model blowing out minutes after takeoff, resulted in a significant drop in 737 fuselage shipments. As a result, Boeing increased its inspections in Kansas and its Seattle home base, refusing to accept aircraft structures with missing parts or incomplete work.
- The deal is a strategic move for Boeing, allowing a key supplier for the 737, 787 Dreamliner, and other commercial jets back in-house during a time of financial stress due to slowed production.
- Boeing reported a cash loss of about $4 billion in the first quarter and is expected to lose a similar amount in the current quarter.
- The company’s credit rating is teetering on the edge of speculative grade, and management is eager to prevent slipping into junk territory.
The deal’s announcement comes amid a series of defects at the Wichita campus, which builds most of the 737 airframe for Boeing and the nose sections of the 787 Dreamliners. These issues have been exacerbated by workforce turnover in the wake of Covid-19. The decision to reintegrate Spirit is a strategic move designed to stabilize Boeing’s supply chain and gain greater control of its aircraft production.
Stay tuned for more updates on this major development in the aviation industry.
