Boeing agrees to acquire spirit AeroSystems for $4.7 billion

Boeing acquires Spirit AeroSystems: Boeing has agreed to purchase Spirit AeroSystems or more than $4 billion, news agency Reuters reported quoting two sources familiar with the matter. This deal, which aims to help Boeing address its ongoing safety crisis, concludes months of negotiations.

Boeing will pay $37.25 per share for Spirit AeroSystems in an all-stock transaction, the report said. The boards of both companies met on Sunday to finalise the terms, with an official announcement expected early on Monday. This acquisition values Spirit Aero at approximately $4.7 billion.

The deal, pending regulatory approvals, will result in the breakup of Spirit AeroSystems, with some of its assets being transferred to French planemaker Airbus.

Boeing, Spirit AeroSystems, and Airbus declined to comment on the transaction.

The acquisition comes as Boeing attempts to recover from a series of safety and quality issues, which came to light following a January 5 incident involving a door plug blowout on a new 737 MAX 9 jet. This event triggered a significant production slowdown for Boeing, affecting the entire global commercial aviation sector.

Spirit AeroSystems, the manufacturer of the problematic door plug, was originally spun off from Boeing in 2005 as part of a cost-cutting strategy. Critics argue this move prioritised cost over quality. Following the January incident, Boeing decided to reacquire Spirit AeroSystems to reform its safety protocols and stabilise its production line.

Initially, Boeing considered paying $35.50 per share in cash for Spirit AeroSystems but later increased the offer to $37.25 per share in stock.

Details regarding a parallel deal for Spirit AeroSystems to sell its Europe-focused operations to Airbus are not yet clear. Both deals are expected to be announced simultaneously early on Monday. This dual announcement marks the breakup of the world’s largest independent aerostructures maker, which has diversified its operations to supply parts for Airbus and other companies since its spin-off nearly two decades ago.

Production Challenges

Acquiring Spirit AeroSystems will not immediately solve Boeing’s issues. After the January door plug incident, the Federal Aviation Administration (FAA) imposed a production cap on Boeing's best-selling MAX jets.

Additionally, Reuters reported on Sunday that the US Justice Department plans to charge Boeing with fraud over two fatal crashes, demanding either a guilty plea or a trial. These crashes, which claimed nearly 350 lives and led to the grounding of the 737 MAX, have severely impacted Boeing's market share and reputation.

Current CEO Dave Calhoun, appointed to address Boeing's issues, is set to leave later this year, leaving the company under increased regulatory scrutiny. Recently, US senators criticised Calhoun for Boeing’s safety problems and questioned his compensation. Airlines have also expressed their dissatisfaction with Boeing due to delivery delays and ongoing issues.

Boeing has submitted a comprehensive plan to the FAA to address systemic quality-control issues within the company.

(With Reuters inputs.)