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Spirit shares rise as Boeing agrees to buy supplier for $4.7 bln in all stock deal

Published 06/30/2024, 07:37 PM
Updated 07/01/2024, 07:03 AM
© Reuters.

Investing.com-- Boeing Co (NYSE:BA) has reached an agreement to reacquire Spirit Aerosystems Holdings Inc (NYSE:SPR) for over $4 billion, ending months of speculation over the deal as the planemaker struggled with a new safety crisis, the two companies said on Monday. 

Boeing will pay $37.25 for each share in Spirit in an all-stock deal, Spirit said in a press release, valuing the aircraft parts maker at $4.7 billion. Including debt, the deal will come up to a total transaction value of $8.3 billion.

"Bringing Spirit and Boeing together will enable greater integration of both companies' manufacturing and engineering capabilities, including safety and quality systems," Spirit CEO Patrick M. Shanahan said.

Spirit shares rose more than 5% in premarket trading Monday, while Boeing fell 1.3%

The deal will see the break-up of Spirit, with some of its assets going to French planemaker Airbus Group SE (EPA:AIR), over antitrust concerns. Spirit said it will divest operations in Malaysia, Scotland and Northern Ireland as part of the deal.

"We would expect it will take 6-12 months for the deal to close," Barclays analysts commented on the news.

"We ultimately expect having SPR under its control to be beneficial to BA's ability to ramp higher, although it could weigh over the near term given the resources that will need to be diverted to improve SPR's Wichita manufacturing. Increased vertical integration with SPR will ultimately make BA more cyclical and more capital-intensive," they added.

Meanwhile, Bank of America analysts said that while the latest news removes some uncertainty, concerns remain regarding the deal's regulatory clearance.

"However, the biggest elephant in the room is Airbus," they highlighted, given that the European planemaker will need to approve the terms for Spirit divesting its Airbus exposure. Last week, Airbus executives said they do not see any deal closing before Q4 2024, and could even take as long as early 2025. 

If closed, the deal will bring Spirit back under Boeing's wing after the planemaker spun off the company in 2005. The move also comes as Boeing grapples with a renewed safety scandal after the mid-air opening of a door on a 737 MAX 9 jet exposed a slew of safety and quality issues. 

The renewed crisis comes after two crashes of the 737 MAX jet killed over 350 people in 2018 and 2019, and ramped up regulatory scrutiny against the company. 

A Reuters report said the U.S. Justice Department sought to criminally charge Boeing with fraud over the two crashes. 

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