Boeing to become supplier on B-21, V-280 after $8.3 billion acquisition of Spirit AeroSystems

WASHINGTON — Boeing has finalized terms to reacquire Spirit AeroSystems in a $8.3 billion deal that, while primarily about commercial aviation, now gives the US planemaker work on key programs from its main competitors in the defense space.

The final deal, announced early this morning, would make Boeing a major supplier on the B-21 bomber built by Northrop Grumman, CH-53K heavy lift helicopter made by Lockheed Martin and the V-280 Valor rotorcraft to be produced by Bell Textron.

Under the terms of the proposed agreement, Boeing will acquire Spirit facilities in Wichita, Kan., and Tulsa, Okla., where Spirit manufactures major fuselage sections for the 737 MAX and 787 Dreamliner, as well as produces major components for key defense programs.

Boeing said it would work with Spirit to “ensure the continuity of operations supporting Spirit’s customers and programs it acquires,” specifically underscoring the company’s intent to cooperate with the Defense Department and Spirit’s existing defense customers.

“We are proud of the role Boeing plays in supporting our men and women in uniform and are committed to ensuring continuity for Spirit’s defense programs,” Boeing CEO Dave Calhoun said in a statement.

The Boeing-Spirit deal is all-stock transaction at an equity value of approximately $4.7 billion, or $37.25 per share. The deal is expected to close in mid-2025.

Separately, Spirit announced that it had entered into a a binding term sheet with Airbus, under which the companies will negotiate a deal that allows Airbus to purchase back its own work currently performed by Spirit. Spirit plans to divest a third pool of facilities in Malaysia, Scotland and Northern Ireland, the company said in a statement.

The deal comes as Boeing grapples with a crisis on its commercial business after a January accident where a door plug on a 737 MAX fuselage blew off the plane in mid-flight, triggering an investigation by the Federal Aviation Administration that has led Boeing to slow commercial jet production. The incident also opened the door for the company to face federal prosecution for violating the terms of a 2021 agreement that allowed Boeing to avoid criminal charges for two fatal MAX crashes in 2018 and 2019.

If the Spirit acquisition is approved by US regulators, the agreement would reunite Boeing with the Wichita-based production facilities it spun off in 2005 in a bid to lower costs.

As a standalone company, Spirit sought to diversify its business away from Boeing, producing large airplane structures for Airbus and winning work on US military contracts as a supplier to major defense primes.

The aerospace supplier had previously set a goal to achieve a 40-40-20 split between its commercial, defense and aftermarket businesses. Defense made up 13 percent of its revenue in 2023. However, Spirit has weathered significant financial turmoil over the past several years, with the COVID-19 pandemic, low profit margins and supply chain pressures all contributing to instability.

Even before the door plug incident occurred, Spirit was cited as the source of a string of manufacturing defects that delayed deliveries of Boeing planes and forced the companies to redo work throughout 2023. Meanwhile, the supplier has taken billions in losses on Airbus and Boeing commercial contracts due to terms Spirit executives have said were unfavorable to the company.

Despite those challenges, Spirit’s defense unit has remained stable, with its current CEO, former Deputy Secretary of Defense Patrick Shanahan, stating that its defense and aftermarket divisions “are performing their commitments operationally and financially.”

Impact On Other Defense Firms

Boeing’s acquisition of the Wichita-based aerospace company has raised questions at some of Spirit’s defense customers, who question whether Boeing will prioritize Spirit’s existing defense projects while it also contends with larger financial challenges in its commercial sector and on troubled defense programs for which Boeing is the prime, such as the KC-46 tanker and new Air Force One planes. At least one large defense prime has already notified the Defense Department of its concerns, an industry source told Breaking Defense. 

During a May hearing of the Senate Appropriations defense subcommittee, Sen. Jerry Moran, R-Kans., also raised concerns about the proposed acquisition, saying that he had spoken to “four or five” defense CEOs who underscored the criticality of Spirit’s defense work. 

“How’s that [business] being accounted for in any kind of merger scenario? And then secondly, is that satisfactory to the companies that Spirit has contracted with? They need to be a part of this discussion too,” Moran, a member of the powerful Senate Appropriations defense subcommittee, told Breaking Defense.

At the hearing, Pentagon acquisition czar Bill LaPlante said the department does not comment publicly on pending mergers and acquisitions, but will provide input to US regulators. 

A Lockheed Martin spokesperson said the company “will provide any assistance needed by the government in its review process to ensure fair competition and a stable supply chain,” adding that “a strong and reliable supply chain is critical for the aerospace industry to support national defense.”

Byron Callan of Capital Alpha Partners said the deal is likely to be approved by US regulators, as its a vertical integration of an aerospace supplier that Boeing once owned.

“This deal didn’t materialize over a short time. Boeing and Spirit and their advisors have had time to run this through DC channels to assess if there would be push-back,” he said in a note to investors. “It’s difficult for us to see who would strongly object to the combination because of competitive harm it might cause. In 2023, 64% of Spirit’s revenues were to Boeing and 19% were to Airbus.”

Shanahan said in a statement that Boeing’s offer was in the best interests of Spirit, its shareholders and its other stakeholders.

“Bringing Spirit and Boeing together will enable greater integration of both companies’ manufacturing and engineering capabilities, including safety and quality systems,” he said.

Analysts have pointed to Shanahan as a leading candidate to replace outgoing Boeing CEO Dave Calhoun, who will retire at the end of the year. Shanahan — the Pentagon’s number two official in 2017 and 2018 who ran the entire department on an interim basis following the exit of Defense Secretary Jim Mattis — was tapped in October to resolve Spirit’s financial difficulties due to his three decades of experience at Boeing, where he rose through the ranks to become its senior vice president for supply chain and operations.

Shanahan “is the favorite given his engineering background, experience as an operational fixer, home in Seattle,” and relationships with Boeing’s supply chain and union, TD Cowen analyst Cai Von Rumohr wrote in a note to investors in June.