Boeing Set to Buy Back Spirit AeroSystems for $8.3B

The Boeing Company BA recently signed a contract to buy back Spirit AeroSystems SPR, its largest independent supplier of aerostructures, which spun off from the jet maker in 2005. In addition to manufacturing aerostructures for every Boeing commercial aircraft currently in production, SPR designs, engineers and manufactures structural components for BA's P-8 and KC-46 Tanker aircraft.

As stipulated in the agreement, Boeing will have to pay the acquisition price of $4.7 billion. Including Spirit's most recently disclosed net debt, the entire deal value comes to almost $8.3 billion.

Benefits of the Acquisition

Boeing already enjoys a significant presence in the aerospace sector, both in the commercial and defense segments, and the acquisition of Spirit AeroSystems is anticipated to strengthen its revenue generation prospects from this space.

In the commercial segment, SPR offers a wide range of products like fuselage, nacelles, wing structures and a few more. Considering the fact that Boeing has been recently struggling financially from a slowdown in its delivery for 737 Max as well as production issues of the 787 model, the addition of SPR to its portfolio can be expected to boost its commercial portfolio in the coming days.

Moreover, since Spirit AeroSystems is also a provider of military jet-related products for other defense majors, this acquisition will offer Boeing the chance to further broaden its customer base, thereby increasing its share in the expanding defense industry as well.

SPR builds forward cockpit and cabin for Lockheed's CH-53K Helicopter and also offers development work for Northrop's B-21 Raider. In 2023, the company was selected by Textron's Bell Helicopter for pre-engineering and manufacturing development efforts associated with the U.S. Army's Future Long-Range Assault Aircraft. It secured several contracts across all five of the Defense and Space segment's focus areas (hypersonics, next-generation crewed aircraft, unmanned aerial systems, next-generation effects and space). 

Acquisition Spree of Aerospace-Defense Players

In recent years, there has been a noticeable increase in mergers and acquisitions in the aerospace-defense industry for a variety of reasons, including the need to meet long-term objectives by attaining economies of scale and operational efficiency, diversifying the portfolio to combat competition and increasing emphasis on cost-reduction measures. These deals are growing in importance because they enable companies to develop as they see fit, expanding their operations, hiring more personnel, creating new technologies and so on, resulting in better products and services, as well as bigger market shares.

Being no exception, Boeing has also been engaged in many valuable acquisitions, like the latest one, in recent times. Prior to Spirit AeroSystems, in June 2024, Boeing's subsidiary, Wisk Aero, a leading Advanced Air Mobility company, acquired Verocel Inc, which is a software verification and validation company.

Apart from Boeing, other aerospace-defense companies that have recently indulged in valuable acquisition deals are as follows:

In March 2024, Teledyne Technologies TDY consented to buy Valeport Holdings 2019 Limited and its subsidiaries, a company that designs and produces underwater sensors for use in energy, construction, environmental and defense applications. The acquisition ought to improve TDY's marine technology portfolio.

TDY has a long-term (three to five years) earnings growth rate of 7.3%. The Zacks Consensus Estimate for its 2024 sales implies an improvement of 0.4% from the prior-year figure.

In May 2024, TransDigm Group, Inc. TDG agreed to acquire Raptor Scientific for $655 million, a manufacturer of complex test and measurement solutions primarily serving the aerospace and defense end markets. Through this acquisition, TDG should be able to provide a wider range of products and gain a larger market share in the highly engineered aviation components industry.

TransDigm Group has a long-term earnings growth rate of 19.7%. The Zacks Consensus Estimate for its fiscal 2024 sales calls for an improvement of 18.7% from the prior-year figure.

Price Movement

In the past month, shares of Boeing have risen 1.2% against the industry's decline of 2.7%.

Image Source: Zacks Investment Research

Zacks Rank

Boeing currently carries a Zacks Rank #4 (Sell).

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