Boeing’s Offer to Buy Spirit Aero Values 737 Holdings for $35 Per Share

Boeing Offer

Boeing has offered to acquire Spirit Aero Holdings for $35 per share, representing a premium of nearly 6% over Spirit’s stock closing price of $33.07 and a 22.4% upside to its closing price on February 29, the day before Boeing’s takeover talks became public. The deal is primarily funded by stock, with the possibility of a small amount of cash being included.

Strategic Reasons

Boeing initiated talks earlier this year to buy back Spirit Aero, a key supplier and former subsidiary, to stabilize a critical part of the supply chain for its strongest-selling jet, the 737 MAX. This move aims to fix production quality issues and address the strained relationship between Boeing and Spirit, which has led to production issues and aircraft parts disputes.

Historical Context

Spirit Aero has a long history, dating back to 1927 when Lloyd Stearman relocated the company from California to Wichita, Kansas. Over the years, it has diversified and become a supplier for both Boeing and Airbus, with Boeing being its largest customer. Spirit produces around 70% of Boeing’s 737 aircraft, including the MAX fuselage.

Financial Implications

Spirit Aerosystem has faced financial challenges, posting a net loss of $617 million and burning through $444 million in the first quarter, far more than analysts had expected. Boeing’s offer of $35 per share is seen as a strategic move to support and stabilize its supplier.

Negotiation Developments

The acquisition discussions have evolved, with Boeing switching its offer from an all-cash deal to one mainly funded by stock. This change reflects the complexities and prolonged negotiations between the companies. The deal also involves Spirit spinning off some of its manufacturing plants to Airbus SE as part of the agreement.

Future Prospects

Boeing and Airbus have reportedly worked out an arrangement to divide Spirit’s programs, allowing each plane maker to have separate catering from Spirit. The deal is expected to be announced within a matter of days, marking a significant development in the aerospace industry’s landscape.