Airbus Takes Over Loss-Making European Operations
In a significant reshuffling within the aerospace industry, Boeing (BA) has agreed to buy back Spirit AeroSystems (SPR) for $4.7 billion in stock, while Airbus has moved to take over the supplier’s struggling Europe-focused activities in exchange for substantial compensation. This decision follows months of intensive negotiations.
The re-acquisition marks the end of nearly two decades of independence for Spirit AeroSystems, the world’s largest standalone aerostructures company. This move comes in the wake of the latest Boeing 737 MAX crisis, triggered by a mid-air door plug blowout in January. The incident exposed vulnerabilities in fuselage manufacturing, prompting Boeing to reconsider its supply chain strategies.
Boeing, which originally spun off Spirit in 2005, will repurchase its former subsidiary at approximately $37.25 per share, giving Spirit an enterprise value of $8.3 billion, including debt. According to Reuters, the repurchase is expected to close by mid-2025.
“Bringing Spirit and Boeing together will enable greater integration of both companies’ manufacturing and engineering capabilities, including safety and quality systems,” said Spirit CEO Pat Shanahan in a statement.
The market reacted positively to the news, with Spirit shares rising by 8% in premarket trading, while Boeing saw a slight dip of just under 1%. The Wichita, Kansas-based company noted that the deal offered a 30% premium compared to the day before the announcement of the talks on March 1.
For Boeing, this acquisition is part of a broader strategy to address ongoing corporate and industrial challenges, particularly those highlighted by the door plug incident on a new Alaska Airlines 737 MAX 9 jet. The crisis had led to significant production slowdowns, affecting the entire global commercial aviation industry.
In an effort to turn the page on these difficulties, Boeing has also announced the planned departure of CEO Dave Calhoun. Industry insiders speculate that Spirit’s Shanahan, a former senior Boeing executive, is among the potential candidates for the CEO position. However, it remains unclear how long Shanahan will stay with Spirit as the Boeing deal progresses.
Analyst Douglas Harned from Bernstein expressed optimism about the acquisition, suggesting that it could bring clarity and allow Boeing’s board to focus on selecting the next CEO.
The acquisition of Spirit AeroSystems by Boeing has raised questions about the future of the work Spirit performs for Airbus, Boeing’s primary competitor. In response, Airbus announced that it would take over key activities at four of Spirit’s plants in the United States, Northern Ireland, France, and Morocco. Additionally, Airbus will assume control of minor operations currently based in Wichita.
This separate agreement between Airbus and Spirit was initiated during the Boeing-Spirit talks and loosely coordinated among the three companies. The deal, subject to due diligence, will see Airbus paying a symbolic $1 for the assets while receiving $559 million in compensation from Spirit, depending on the final details.
Airbus shares experienced a 2% rise in Monday morning trading following the announcement. Industry sources indicated that the European planemaker had sought up to $1 billion in compensation due to the loss-making nature of Spirit’s Airbus-related activities. The plants in question produce essential parts for Airbus’s A350 and A220 airliners.
Airbus’s decision to assume control of these operations echoes its previous acquisition of the CSeries small jetliner program from Bombardier in 2018 for just $1, later rebranding it as the A220. The move also addresses concerns about the future of Northern Ireland’s top industrial employer, with Airbus potentially needing to invest significantly to boost production and reduce costs.
As part of the restructuring, Spirit plans to sell its operations in Prestwick, Scotland, and Subang, Malaysia, that support Airbus programs, as well as its non-Airbus-related operations in Belfast. This strategic shift aims to streamline operations and address the evolving demands of the aerospace industry.
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