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

Air War, Pentagon, Space

WASHINGTON — Boeing has finalized terms to reacquire Spirit AeroSystems in The $8.3 billion deal, which, while primarily focused on commercial aviation, now puts the American aircraft manufacturer to work on key programs from its main competitors in the defense sector.

Final agreement,it was announced early this morning that Boeing is the main supplier of the B-21 bomber manufactured by Northrop Grumman, the CH-53K heavy transport helicopter manufactured by Lockheed Martin and the V-280 Valor helicopter to be manufactured by Bell Textron.

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

Boeing said it will work with Spirit to “ensure continuity of operations in support of Spirit’s customers and the programs it acquires,” specifically emphasizing the company’s intention to work with the Department of Defense and Spirit’s existing defense customers.

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

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

Separately, Spirit announced it had entered into a binding term sheet with Airbus under which the companies will negotiate a deal that would allow Airbus to buy 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 in its commercial operations following a January accident in which a door plug on a 737 MAX fuselage flew off in mid-flight, triggering a Federal Aviation Administration investigation that led to a slowdown in Boeing’s commercial jet production. The incident also opened the door to 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 U.S. regulators approve the Spirit acquisition, the deal would allow Boeing to reconnect with the Wichita manufacturing facility it spun off in 2005 to cut costs.

As a standalone company, Spirit sought to diversify its business away from Boeing, producing large aircraft structures for Airbus and winning business for the U.S. military as a supplier to major defense contractors.

The aerospace equipment supplier had previously set a goal of achieving a 40-40-20 split between its commercial, defense and aftermarket businesses. Defense accounted for 13 percent of its revenue in 2023. But Spirit has faced significant financial turmoil over the past few years, with the COVID-19 pandemic, low profit margins and supply chain pressures contributing to instability.

Even before the door-plug incident, Spirit was cited for a series of manufacturing defects that delayed deliveries of Boeing planes and forced the companies to rework the planes in 2023. Meanwhile, the supplier has suffered billions in losses on commercial contracts with Airbus and Boeing due to terms that Spirit executives said were unfavorable to the company.

Despite these 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 businesses are “delivering on their commitments operationally and financially.”

Impact on other defense companies

Boeing’s acquisition of the Wichita-based aerospace company has raised questions among some of Spirit’s defense customers, who wonder whether Boeing will prioritize Spirit’s existing defense projects when the company is also grappling with larger financial challenges in its commercial sector and in troubled defense programs where Boeing is a leader, such as the KC-46 tanker and the new Air Force One planes. At least one major defense leader has already notified the Defense Department of its concerns, an industry source told Breaking Defense.

During a May hearing of the Senate Defense Appropriations Subcommittee, Senator Jerry Moran, Republican of Kansas, also raised concerns about the proposed acquisition, saying he had spoken to “four or five” defense company CEOs who stressed the critical importance of Spirit’s defense work.

“How does this (business) factor into any merger scenario? And secondly, is it satisfactory to the companies that Spirit has a contract with? They need to be part of this discussion as well,” Moran, a member of the powerful Senate Defense Appropriations Subcommittee, told Breaking Defense.

During the hearing, Pentagon acquisitions chief Bill LaPlante said the department does not comment publicly on planned mergers and acquisitions but will forward its comments to U.S. regulators.

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

Byron Callan of Capital Alpha Partners said the deal would likely be approved by U.S. regulators because it represents a vertical integration of the aerospace equipment supplier that was once owned by Boeing.

“This deal did not materialize in a short time frame. Boeing and Spirit and their advisors have had time to navigate it through DC channels to assess whether there would be resistance,” he said in a note to investors. “We find it difficult to see who would strongly oppose the combination given the competitive harm it could cause. In 2023, 64% of Spirit’s revenue came from Boeing, and 19% from Airbus.”

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

“The combination of Spirit and Boeing will enable better integration of the manufacturing and engineering capabilities of both companies, including safety and quality systems,” he said.

Analysts have named Shanahan as the leading candidate for the outspoken position.ed to replace outgoing Boeing CEO Dave Calhoun, who will retire at the end of the year. Shanahan — the second Pentagon official in 2017 and 2018 to temporarily run the entire department following the departure of Defense Secretary Jim Mattis — was tapped in October to resolve Spirit’s financial struggles based on his three decades of experience at Boeing, where he rose to senior vice president of supply chain and operations.

TD Cowen analyst Cai Von Rumohr wrote in a note to investors in June that Shanahan “is the favorite due to his engineering background, experience as an operational repair specialist, Seattle location” and ties to Boeing’s supply chain and union.