Boeing and Supplier Spirit Aero Reach Deal: Report

It took months, but Boeing and its fuselage supplier Spirit AeroSystems have finally appeared to agree to a deal. It’s a step Boeing is taking to improve its manufacturing quality.

On Sunday, Reuters reported that Boeing agreed to acquire Sprit Aero for $37.25 a share in stock. The deal values Spirit at about $8 billion, including the company’s debt.

Boeing and Spirit Aero didn’t immediately respond to a request for comment.

That valuation is about eight times Sprit AeroSystem’s 2019 earnings before interest, taxes, depreciation, and amortization, or Ebitda. That Ebitda was generated in a year before two tragic 737 MAX crashes and Covid-19.

Investors need to look at prior earnings because Spirit Aero has experienced a lot of turmoil in recent years and isn’t expected to generate positive Ebitda in 2024, according to FactSet. Ebitda is expected to recover to 2019 levels by 2026.

Earnings for Boeing’s supplier are depressed in 2024 because Boeing isn’t building as many MAX jets as it hoped after an emergency door plug blowout of a 737 MAX 9 jet operated by Alaska Air on Jan. 5. The incident resulted in slower production and more oversight from aviation regulators.

The pending deal with Beoing will end Spirit’s decadeslong independence. Spirit Aero was a part of Boeing until 2005 when Boeing sold it to a private equity firm. A year later, Spirit Aero sold shares to the public for $26 apiece.

Things didn’t work out great for investors. The $37.25 price implies average annual gains of about 2% a year, excluding dividends. Spirit stock did trade above $100 a share in 2018.

Spirit Aero stock closed at $32.87 on Friday, about 12% below the $37.25 level. Spirit Aero shares won’t likely trade to $37.25 on Monday. It depends partly on what Boeing stock does. What’s more, investors don’t get $37.25 worth of Boeing stock immediately. The deal will take months to close. Investors always want to get paid to wait.

Coming into Monday trading, Spirit Aero stock was up about 3% so far this year. Shares have been trading based on expectations for a Boeing acquisition for months. Boeing stock was down about 30% for the year while the Dow Jones Industrial Average was up about 4%.

Write to Al Root at [email protected]