Boeing (GS) has proposed acquiring Spirit AeroSystems Holdings (SPR) for approximately $35 per share, primarily through a stock deal, according to sources familiar with the matter. This proposal marks a shift from Boeing’s initial plan for an all-cash offer following months of negotiations. The offer represents a 6% premium to Spirit’s stock price as of Monday’s close, valuing the company at around $4.1 billion. The change in the funding strategy is expected to alleviate some financial pressure on Boeing, which has been navigating a challenging economic landscape.
The decision to switch to a stock-based deal reflects Boeing’s need to manage its cash flow more effectively amid ongoing financial strain. The company’s financial challenges have been compounded by issues with its 737 Max jet and federal investigations. Stifel analyst Bert W. Subin noted that the $35 per share offer is a reasonable outcome for both parties. Despite the complexity of the transaction, which includes Spirit spinning off some manufacturing plants to Airbus SE, the deal is expected to be finalized shortly.
Market Overview:- Boeing shifts to a stock deal for Spirit AeroSystems.
- Offer represents a 6% premium to Spirit’s recent stock price.
- Deal complexity includes Spirit's plant spin-off to Airbus.
- Boeing aims to ease cash flow pressure with stock deal.
- Spirit AeroSystems' shares declined 4% in premarket trading.
- Boeing’s financial woes include 737 Max issues and federal probes.
- Final terms of the deal could still include some cash.
- The transaction is expected to be announced within days.
- Boeing’s acquisition could enhance control over manufacturing quality.
Shares of Spirit AeroSystems fell 4% to $31.75 in premarket trading on Tuesday, following a year-to-date gain of 4.1% driven by sale anticipation despite the company's financial difficulties. Boeing’s stock, down 31% for the year, saw an additional 1.1% decline in premarket activity. The deal, once finalized, would mark a significant reversal for Boeing, bringing back in-house the manufacturing it outsourced nearly two decades ago. This move aims to improve control over the quality of its jetliner structures, a critical factor as Boeing contends with retraining mechanics and addressing quality lapses.
Boeing’s financial pressures are significant, with the company projected to burn through approximately $8 billion in cash during the first half of 2024. This is largely due to slowed production as it focuses on quality improvements. The company’s total debt stands at $58 billion, with more than $10 billion raised through bond sales in late April to support its operations. Acquiring Spirit AeroSystems is seen as a strategic move to enhance Boeing’s operational control and stabilize its manufacturing processes amid ongoing challenges.
