In a surprising move, Boeing has decided to reacquire Spirit AeroSystems, the fuselage maker it spun off nearly two decades ago. This bold all-stock transaction, valued at $4.7 billion, promises to bring significant changes to the aerospace industry. With the inclusion of Spirit’s debt, the total transaction value jumps to a hefty $8.3 billion. The deal is set at $37.25 per share in Boeing stock, a premium over Spirit’s recent closing price of $32.87.
This acquisition comes at a crucial time for Boeing, following a dramatic incident involving a Boeing 737 Max 9 where a fuselage panel blew out midair. This event intensified scrutiny on Boeing’s safety and quality control measures, particularly as Spirit supplies fuselages for Boeing’s aircraft, including the 737 and 787 Dreamliners.
The relationship between Boeing and Spirit has come full circle. Spirit, originally part of Boeing’s operations in Kansas and Oklahoma, was spun off in 2005. Today, Boeing represents a significant portion of Spirit’s business, accounting for about 70% of its revenue. The remainder comes largely from Airbus, Boeing’s primary competitor.
Boeing CEO Dave Calhoun, who plans to step down at the end of the year, emphasized the strategic importance of the acquisition. “This move fully aligns our production systems and workforces,” Calhoun stated, highlighting the company’s dedication to enhancing quality and safety. The transaction, expected to close by mid-2025, awaits regulatory and shareholder approval, as well as the divestiture of Spirit’s Airbus-related operations.
Spirit’s CEO, Pat Shanahan, is being considered as a potential successor to Calhoun, adding another layer of intrigue to the deal. Meanwhile, Airbus has secured a $559 million compensation agreement with Spirit to acquire its Airbus-focused manufacturing lines, ensuring a smooth transition for its operations.
The recent issues with Boeing’s aircraft have underscored the need for this consolidation. A National Transportation Safety Board report revealed that the bolts securing the door plug on the ill-fated Alaska Airlines flight were improperly attached, highlighting broader production flaws. Boeing’s stringent new policy to accept only defect-free fuselages aims to prevent such errors in the future.
The safety crisis has taken a toll on Boeing’s financial health, causing delays in plane deliveries and substantial cash burn, projected at $8 billion for the first half of 2024. Boeing’s stock has suffered, dropping over 30% this year, and the Federal Aviation Administration has imposed stringent production oversight.
The stakes are high as Boeing navigates these challenges. The company’s safety record has been under intense scrutiny, especially following two fatal Max crashes. Lawmakers have criticized Calhoun and Boeing’s leadership for perceived lapses in safety improvements.
This acquisition marks a pivotal moment for Boeing, reflecting its commitment to rebuilding trust and reinforcing its position in the aerospace industry. With Spirit AeroSystems back in the fold, Boeing aims to emerge stronger and more resilient in the face of ongoing challenges.
(Source: Barron’s | WSJ)
