Spirit Aero to be broken up as Boeing agrees to $4.7 billion stock deal

By Tim Hepher, Shivani Tanna and Mike Stone

(Reuters) -Boeing agreed to buy back Spirit AeroSystems for $4.7 billion in stock and Airbus moved to take on the supplier's loss-making Europe-focused activities, sending shares in all three companies higher in a rare transatlantic break-up.

The near-two-decade independence of the world's largest standalone aerostructures company ended in a carve-up between its largest customers after the latest Boeing 737 MAX crisis, sparked by a mid-air door plug blowout in January, brought to a head doubts over the resilience of fuselage manufacturing.

Boeing, which spun off Spirit's core Wichita and Oklahaoma plants in 2005, said it would repurchase its former subsidiary for about $37.25 per share, as reported by Reuters on Sunday, giving it an enterprise value of $8.3 billion including debt.

"Bringing Spirit and Boeing together will enable greater integration of both companies' manufacturing and engineering capabilities, including safety and quality systems," Spirit CEO Pat Shanahan said in a statement.

Spirit shares rose 3.6% in early U.S. trading, while Boeing gained 2%

The Wichita, Kansas-based company said the deal offered a 30% premium versus the day before Boeing and Spirit announced talks to bring the struggling supplier back in house on March 1.

Boeing has long pondered buying back its former subsidiary, which analysts say has struggled to thrive independently despite diversifying into work for Europe's Airbus and others.

The decision to go ahead comes as Boeing tries to resolve a sprawling corporate and industrial crisis that has engulfed one of the industry's key suppliers.

Boeing is trying to move past months of difficulties sparked by the Jan. 5 blowout of a door plug on a virtually new Alaska Airlines 737 MAX 9 jet that exposed quality problems.

Those issues have led to a substantial slowdown in output at Boeing, rippling across the global commercial aviation industry.

Rating agency Fitch said the deal should be "operationally beneficial" to Boeing, allowing it to better plan and control future 737 MAX production.

The U.S. planemaker has announced the planned departure of CEO Dave Calhoun in the wake of the crisis, with industry executives and analysts pointing to Spirit's Shanahan, a former senior Boeing executive, as one of the possible replacements.

It was not immediately clear how long he might be tied to Spirit, with the Boeing deal not due to close until mid-2025.

In a note to investors, Bernstein analyst Douglas Harned said the deal "should add clarity ... potentially for the Boeing board’s attention to move to the decision on the next CEO".

AIRBUS DEAL

Spirit had been spun off from Boeing in one of a series of moves that critics say were emblematic of a focus on cost-cutting over quality.

Boeing made the decision to buy it back in the aftermath of the door plug blowout, in what it described as an effort to address its safety problems and shore up its production line.

That raised questions over the future of work that Spirit carries out for Boeing's arch-rival Airbus, prompting the CEO of the European giant to warn in April that it stood ready if necessary to veto changes in control of Airbus-related plants.

On Monday, Airbus said it would take over core activities at four of the supplier's plants in the United States, Northern Ireland, France and Morocco as reported by Reuters last week.

It will also take over minor work currently carried out in Wichita. The separate Airbus deal was triggered by talks between Boeing and Spirit and was loosely coordinated between the three companies, sources said. It is subject to due diligence.

Airbus shares rose about 3.3% on Monday.

Since Spirit's Airbus-related operations are in the red, industry sources had said the planemaker was pressing for up to $1 billion in compensation in return 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 outlines of the deal, while it would pay the supplier a symbolic $1 for the assets.

That echoes its decision to buy the Canadian-designed CSeries small jetliner program for just $1 from Bombardier in 2018. It later renamed the jet the A220.

Until the latest shake-up, Airbus had not envisaged taking control of the loss-making A220 wings manufacturing carried out in Belfast, which Spirit bought from Bombardier in 2019.

Monday's deal lifts doubts over the future of part of Northern Ireland's top industrial employer, though sources have said Airbus may need to invest significant sums to increase output and make the wings more affordable to produce.

Spirit said it planned to sell operations in Prestwick, Scotland and in Subang, Malaysia that support Airbus programs and those in Belfast that do not support Airbus programs.

(Reporting by Mike Stone and David Shepardson in Washington, Allison Lampert in Montreal, Tim Hepher in Paris and Shivansh Tiwary, Abhijith Ganapavaram and Shivani Tanna in Bengaluru; editing by David Gaffen, Shubham Kalia, Jamie Freed and Jason Neely)