((Automated translation by Reuters, please see disclaimer https://bit.ly/rtrsauto))
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Airbus takes over some of Spirit’s aircraft-related activities
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Spirit-made 737 MAX door stopper involved in in-flight explosion
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Boeing parted ways with fuselage supplier in 2005
(Added pre-Wall St trades to paragraph 5, analyst to paragraph 13) by Tim Hepher, Shivani Tanna and Mike Stone
Boeing BA.N agreed to buy Spirit AeroSystems SPR.N for $4.7 billion in stock and Airbus decided to take over the supplier’s loss-making European operations in exchange for hundreds of millions of dollars in compensation after months of negotiations.
The latest Boeing 737 MAX crisis, triggered by a mid-flight door stopper explosion in January, highlighted doubts about the strength of fuselage construction.
Boeing, which spun off from Spirit in 2005, said it would buy its former subsidiary for about $37.25 per share, as Reuters reported on Sunday, giving it an enterprise value of 8. $3 billion including debt.
“The combination of Spirit and Boeing will enable greater integration of the two companies’ manufacturing and engineering capabilities, including safety and quality systems,” Spirit Chief Executive Officer Pat Shanahan said in a statement.
Spirit shares rose about 8% ( ) in premarket trading, while Boeing fell just under 1%.
The Wichita, Kansas-based company said the deal offered a 30% premium over the day before Boeing and Spirit announced talks to bring the troubled supplier back into the company’s fold on March 1.
Boeing has long considered buying its former subsidiary, which analysts say has struggled to thrive independently despite diversifying its operations to Airbus AIR.PA and other companies.
The decision to move forward comes as Boeing attempts to resolve a sprawling industrial and corporate crisis that has engulfed one of the industry’s major suppliers.
Boeing is trying to overcome months of difficulties triggered by the explosion on January 5 of a door stopper on a nearly new Alaska Airlines ALK.N 737 MAX 9 plane, which highlighted quality problems.
These problems led to a significant slowdown in production at Boeing, which had repercussions across the global commercial aviation industry.
The U.S. planemaker also announced the planned departure of its chief executive Dave Calhoun in the wake of the crisis, with executives and industry analysts pointing to Spirit’s Shanahan, a former Boeing executive, as one of the possible replacements.
It is not yet clear how long he will remain tied to Spirit, with the deal with Boeing not expected to close until mid-2025.
In a note to investors, Bernstein analyst Douglas Harned said the deal “should add clarity… potentially to shift the focus of Boeing’s board to the decision on the next CEO.”
THE AGREEMENT WITH AIRBUS
Spirit, the maker of the door stopper, had been separated from Boeing as part of a series of moves that critics see as emblematic of a desire to cut costs at the expense of quality.
Boeing made the decision to buy Spirit following the door jam explosion, in what it described as an effort to resolve its safety concerns and consolidate its production line.
The move raised questions about the future of Spirit’s work for Boeing’s archrival Airbus, prompting the European giant’s chief executive to warn in April that it stood ready, if necessary, to oppose veto changes in control of factories linked to Airbus.
On Monday, Airbus said it would take over core operations at four of the supplier’s factories in the United States, Northern Ireland, France and Morocco, as Reuters reported last week.
It will also take over minor work currently being done in Wichita. The separate deal with Airbus was triggered by discussions between Boeing and Spirit and was loosely coordinated between the three companies, the sources said. It is subject to due diligence.
Airbus shares were up about 2% in Monday morning trading.
With Spirit’s Airbus-related operations loss-making, industry sources had said the European planemaker was seeking up to $1 billion in compensation in exchange for taking over the plants, which make strategic parts for its A350 and A220 airliners.
Airbus said it would receive $559 million in compensation from Spirit, depending on the final contours of the deal, while it would pay the supplier a symbolic dollar for the assets.
This echoes its decision to buy the Canadian-designed CSeries small airliner program for just $1 from Bombardier BBDb.TO in 2018. The plane was later renamed the A220.
Until the latest shakeup, Airbus had not considered taking control of the loss-making A220 wing manufacturing plant in Belfast, which Spirit bought from Bombardier in 2019.
Monday’s deal removes doubts over the future of part of Northern Ireland’s main industrial employer, although sources said Airbus may need to invest significant sums to increase production and make the wings more affordable to produce.
Spirit said it plans to sell its operations in Prestwick, Scotland, and Subang, Malaysia, which support Airbus programs, as well as its operations in Belfast which do not support Airbus programs.
