(Bloomberg) — Boeing Co. agreed to buy back Spirit AeroSystems Holdings Inc. for $37.25 a share in an all-stock deal that values the supplier at $4.7 billion, unwinding a two-decade separation as the embattled US planemaker tries to fix its manufacturing defects.
The total transaction value is about $8.3 billion, including Spirit’s last reported net debt, according to a statement early on Monday. Rival Airbus SE will also take over parts of Spirit that make components for its aircraft, and the European planemaker will pay a nominal price of $1 for the assets, while receiving $559 million in compensation, according to a separate release.
“We believe this deal is in the best interest of the flying public, our airline customers, the employees of Spirit and Boeing, our shareholders and the country more broadly,” Boeing Chief Executive Officer Dave Calhoun said in the statement.
Spirit rose 5.8% in pre-market trading, ahead of the open in New York. Boeing fell 1.3%, adding to a 30% drop for the first six months of 2024.
The complex, three-way transaction reunites Boeing with an operation that it spun off in 2005 as part of a broader push to trim costs and outsource assets. The move to take Spirit back in-house came in the wake of the near catastrophic accident on Jan. 5 in which a fuselage that had been assembled by Spirit lost a door-shaped panel during flight. That mishap triggered a chain reaction at Boeing, which has seen a wholesale management shakeup, federal investigations, and scrutiny from regulators.
The price that Boeing is paying is 30% above Spirit’s closing stock price on Feb. 29, the day before the companies confirmed they were in merger talks.
Airbus said it entered a “binding term sheet agreement” with Spirit that will see the planemaker take on facilities that make A350 fuselage sections in Kinston, North Carolina, and St. Nazaire in France. It will also seek to buy the A220 wing and mid-fuselage production in Belfast, Northern Ireland, and Casablanca, Morocco, as well as A220 pylon manufacturing at Spirit’s headquarters, it said.
The transaction is set to close in the middle of next year. Boeing said it’s taking over “substantially all Boeing-related commercial operations,” as well as additional commercial, defense and aftermarket operations.
Spirit will pay Boeing a $150 million termination if it pulls out of the deal, while Boeing is liable to pay Spirit $300 million if terminates the transaction, according to a stock exchange filing.
The deal, struck after months of negotiations, comes as Boeing approaches another milestone, a settlement with the US Justice Department that would potentially involve pleading guilty to criminal fraud in relation to two crashes involving the 737 Max aircraft that occurred in rapid succession in 2018 and 2019.
The US government plans to charge Boeing, leaving the planemaker to choose between pleading guilty or taking the risk of going to trial, people familiar with the matter said on Sunday.
The effort to buy back Spirit will likely be welcomed by US aviation regulators concerned about manufacturing quality lapses as the companies deal with massive worker turnover following the pandemic. But the tie-up and dissolution of Spirit would also need to be approved by Pentagon and US antitrust regulators increasingly concerned about consolidating aerospace and defense manufacturing.
While it will likely dilute Boeing’s earnings in 2026, the benefits of reiintegrating Spirit “are priceless,” Jefferies analyst Sheila Kahyaoglu said in a research note, adding that the deal will strengthen Boeing’s supply chain and give it the opportunity to improve operations and efficiency at Spirit.
The Boeing transaction, once completed, will reunite assets that for decades once sat under one roof, bringing together thousands of workers and decades of shared expertise. It also brings a longtime former Boeing leader back to the company as directors hunt for a new leader, with Calhoun set to step down at the end of the year.
Spirit CEO Pat Shanahan was a longtime Boeing executive steeped in factory operations, known for helping turn around the 787 Dreamliner after a troubled start. He’s considered a potential contender to succeed Calhoun in Boeing’s top role.
Shanahan will be eligible to collect restricted stock units worth about $8.95 million as of Friday if he stays with the company for a year or until the merger is completed, the supplier said in a filing. Spirit also established a $50 million bonus program to encourage certain employees to remain and help complete the deal, according to the filing.
Spirit has faced growing financial pressure and scrutiny alongside Boeing after the door-shaped panel on a 737 Max 9 model blew out minutes after takeoff. Shipments of 737 fuselages have plummeted as Boeing steps up its inspections in Kansas and back at home near Seattle, and declined to accept aircraft structures with missing components or incomplete work.
For Boeing, the deal brings a key supplier for the 737, 787 Dreamliner and other commercial jets back in-house at a time when the company is feeling the financial strain from the slowed-down output. Boeing lost about $4 billion in cash in the first quarter and is set to bleed a similar amount in the current three months of the year. The company’s credit rating is hovering one level above speculative grade, and management is keen to avoid slipping into junk territory.
PJT Partners was the financial adviser to Boeing, with Goldman Sachs Group Inc. and Consello acting as additional advisers.
–With assistance from Siddharth Philip and Allyson Versprille.
(Updates with stock movement, share grant, analyst comment from fourth paragraph)
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