Boeing (BA, Financial) announced it will acquire Spirit AeroSystems (SPR, Financial) in an all-stock deal valued at $4.7 billion, or $37.25 per SPR share. Including Spirit's debt, the total transaction value is $8.3 billion. This deal appears to be driven by both strategic fit and an effort to address safety concerns. Recent safety issues and criticism about outsourcing production to third parties likely influenced this decision.
- Spirit AeroSystems was previously part of Boeing but was spun off in 2005. Now it's rejoining Boeing. Spirit is a major manufacturer of aerostructures, including fuselages, integrated wings, pylons, and nacelles. The transaction is expected to close by mid-2025.
- Boeing is Spirit's largest customer, but Spirit also serves Airbus. Boeing will acquire all Boeing-related commercial operations and additional commercial, defense, and aftermarket operations. Airbus will acquire Airbus-related commercial work packages. Spirit plans to sell certain operations, including those in Belfast, Northern Ireland, Scotland, and Malaysia.
- Boeing believes this deal benefits the flying public, airline customers, employees, and shareholders. By reintegrating Spirit, Boeing aims to align its commercial production systems, Safety and Quality Management Systems, and workforce priorities around safety and quality.
- Boeing has faced significant safety issues in recent years, impacting its financials and reputation. For instance, in Q1, Boeing reported its first revenue decline in six quarters. The Commercial Airplanes segment saw a 31% year-over-year revenue drop to $4.65 billion, partly due to slowed 737 production following a door plug incident at Alaskan Airlines. Boeing has also slowed 787 production.
Overall, reintegrating Spirit AeroSystems into Boeing seems logical. Bringing fuselage production back in-house should address criticisms about outsourcing too much of its production process. The deal's subdued premium is fair for Boeing, and the fact that Boeing's shares are trading higher indicates investor approval. While the deal makes financial sense, addressing public safety concerns likely played a significant role in the decision.
