Boeing to acquire Spirit AeroSystems for $4.7 billion

Boeing Co. has agreed to purchase Spirit AeroSystems Holdings Inc. in an all-stock deal valued at $4.7 billion, or $37.25 per share, unwinding a two-decade separation. This strategic move aims to address ongoing manufacturing defects and streamline operations.

The total transaction value, including Spirit’s last reported net debt, amounts to approximately $8.3 billion.

The deal also involves a significant transaction with Airbus SE, where the European planemaker will acquire parts of Spirit’s operations for a nominal price of $1, alongside receiving $559 million in compensation.

Boeing’s acquisition details and financial implications

Boeing’s acquisition price represents a 30% premium over Spirit’s closing stock price on February 29, preceding the confirmation of merger talks.

This three-way transaction reunites Boeing with an operation it spun off in 2005 to reduce costs and outsource assets.

The decision to bring Spirit back in-house follows a near-catastrophic incident on January 5, when a Spirit-assembled fuselage lost a door-shaped panel during flight, leading to significant scrutiny and management changes at Boeing.

Airbus’s strategic move in the transaction

Airbus has entered a “binding term sheet agreement” with Spirit to acquire facilities producing A350 fuselage sections in Kinston, North Carolina, and St. Nazaire, France.

Airbus plans to purchase A220 wing and mid-fuselage production in Belfast, Northern Ireland, and Casablanca, Morocco, as well as A220 pylon manufacturing at Spirit’s headquarters. This acquisition aims to enhance Airbus’s production capabilities and streamline its supply chain.

Regulatory and financial challenges ahead

The Boeing transaction is expected to close in mid-2025, subject to approval from US aviation regulators, the Pentagon, and US antitrust authorities.

The acquisition is seen as a positive move by regulators concerned about manufacturing quality lapses, particularly in light of significant worker turnover post-pandemic.

The deal’s completion hinges on overcoming potential regulatory hurdles, given increasing scrutiny over aerospace and defence manufacturing consolidation.

Impact on Boeing and Spirit AeroSystems operations

The reacquisition will reunite assets and expertise that were once under one roof, consolidating thousands of workers and decades of shared knowledge.

This move comes as Boeing prepares for a potential settlement with the US Justice Department over charges related to the 737 Max crashes in 2018 and 2019. The government is expected to charge Boeing, leaving the company to choose between pleading guilty or risking a trial.

Financial strain and management transitions

For Boeing, bringing Spirit back under its umbrella is crucial amid ongoing financial challenges. The company reported a cash loss of approximately $4 billion in the first quarter and anticipates similar losses in the current quarter.

With its credit rating precariously close to speculative grade, Boeing aims to avoid slipping into junk territory.

The acquisition also signals a potential leadership change, with Boeing CEO Dave Calhoun set to step down at the end of the year.

Spirit AeroSystems CEO Pat Shanahan, a former Boeing executive known for his work on the 787 Dreamliner, is considered a contender for Calhoun’s position.

Future outlook for the aerospace industry

This acquisition reflects broader trends in the aerospace industry, where major players are consolidating to address operational inefficiencies and manufacturing defects.

The return of Spirit AeroSystems to Boeing’s fold is expected to stabilise production processes and improve overall quality control. As both companies navigate the post-pandemic landscape, their ability to integrate operations smoothly will be critical to their success.