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Boeing (NYSE:BA) agreed to acquire Spirit AeroSystems (NYSE:SPR) for $37.25 a share in an all-stock deal that had been expected for several months, the companies announced on Monday.
Analysts at Wall Street banks offered opinions on what the deal could mean for Boeing (BA) as the company seeks to boost output of planes and overcome serious doubts about product safety.
Boeing’s (BA) stock rose 2.5%, while shares of Spirit (SPR) advanced 3.7% by 1:36 p.m. ET.
David Strauss, analyst, Barclays (June 30 report before deal confirmation): “We would expect it will take six to 12 months for the deal to close. We ultimately expect having Spirit (SPR) under its control to be beneficial to Boeing’s (BA) ability to ramp higher, although it could weigh over the near term given the resources that will need to be diverted to improve Spirit’s (SPR) Wichita manufacturing. Increased vertical integration with Spirit (SPR) will ultimately make Boeing (BA) more cyclical and more capital-intensive.”
Douglas Harned, analyst, Bernstein (July 1 report before deal confirmation): “Boeing (BA) has described Spirit (SPR) as the biggest bottleneck in its production process. But, everything we have heard is that Spirit (SPR) is improving rapidly, with fuselages now being delivered with no outstanding jobs (i.e., traveled work). We believe that there should be some benefits operationally to Boeing (BA) having direct control over Spirit (SPR)….We may now be starting to see the impact of improvements in Spirit (SPR) because there is a significant lag between a fuselage delivery from Spirit (SPR) and a completed aircraft delivery of at least four weeks….We see the higher production as a strong positive sign that Boeing can be on track to reach its 38/month goal by year end. If that 38 a month is achieved, by that point we would expect that FAA to be willing to allow the next rate break (to 42 a month).”
Ronald Epstein, analyst, Bank of America Securities (July 1 report before deal confirmation): “In our view, Boeing (BA) spinning out Spirit (SPR) in 2005 should have never happened and the decision haunted both companies time and time again. Despite the near-term challenges, for Boeing any potential deal could be a positive….Should Spirit (SPR) be brought back in house, Boeing (BA) should be able to exercise greater quality control, increase oversight on production and provide a more stable future for the company. This will be critically important to ensure smoother production for the 737 and safeguard the 787-ramp up. Additionally, with Spirit (SPR) comes defense program exposure on existing programs (CH-53K) and next-generation programs (B-21) for Boeing (BA) to maintain. If a potential deal does materialize and goes through, this could be a critical turning point for Boeing (BA) to right the ship.”