Quiver Quantitative - Boeing (NYSE:BA) (BA) is exploring the sale of at least two defense business units amidst its significant ongoing crisis. The aircraft manufacturer has engaged financial advisers to find potential buyers for some of its smaller units, a move that began roughly a year ago and not directly triggered by the recent accident on January 5, which has drawn extensive scrutiny towards Boeing.
Units under consideration for sale include the Digital Receiver Technology unit, known for its government intelligence and defense products, and some defense programs within its global services division. Earlier, Boeing considered selling its Argon ST subsidiary, a company focusing on military command, control, surveillance, and reconnaissance systems, acquired in 2010 for approximately $775 million, though this process is currently on pause.
Market Overview: -Boeing's stock experienced a slight increase following reports on these potential sales. -The company is also contemplating the future of its stake in United Launch Alliance, a joint venture with Lockheed Martin (NYSE:LMT), which has caught the interest of Jeff Bezos’s Blue Origin LLC. -No final decisions on sales have been made, and Boeing’s strategy may evolve.
Key Points: -Boeing's deliberations on selling parts of its defense sector predate a recent accident involving a 737 Max 9, underscoring the company’s broader strategy to address financial challenges. -The potential divestitures and restructuring efforts, including talks with Spirit AeroSystems (NYSE:SPR) about reintegration, aim to reduce debt and finance growth. -Boeing faces substantial pressure to recover from financial losses incurred during the Covid pandemic and the grounding of the 737 Max fleet.
Looking Ahead: -Any proposed sales will likely undergo scrutiny from the Pentagon and antitrust regulators, given concerns over defense sector consolidation and Boeing’s dominant position in US civil aircraft production. -The company’s ability to ramp up 737 production is critical for its financial recovery but is currently limited by regulatory restrictions following the January accident. -Boeing's immediate focus includes managing government scrutiny, navigating the aftermath of the 737 Max 9 incident, and executing strategic divestitures to streamline operations and finances.
Boeing's consideration of selling off parts of its defense business signifies a strategic pivot as it seeks to navigate through one of its most turbulent periods. By potentially divesting certain units, Boeing aims to streamline its operations, reduce debt, and focus on core growth areas. These moves, however, come at a time of intense scrutiny from both regulatory bodies and the public, following a series of setbacks including production issues and safety concerns.
The outcome of these deliberations will play a crucial role in Boeing’s ability to recover and strengthen its position in both defense and commercial aerospace sectors. The path ahead for Boeing involves careful navigation of regulatory challenges, strategic restructuring, and regaining stakeholder trust amidst ongoing scrutiny.
This article was originally published on Quiver Quantitative