Buyers showing interest in Spirit AeroSystems’ Tulsa division

12/04/2013 11:58 AM

08/08/2014 10:19 AM

Spirit AeroSystems has received significant interest from potential buyers of its Oklahoma division, which offers integrated wing structures and aerospace products, the company has said.

Spirit has narrowed down a list of possible buyers, Spirit CEO Larry Lawson said this month. But he doesn’t expect that a deal would close until sometime next year.

Lawson didn't name possible buyers, but he said the interest has been strong.

“We were frankly surprised,” Lawson said. “We thought there would be a healthy interest in Tulsa, but we were surprised at the amount of interest in Tulsa.”

The company announced its intention to sell its Tulsa and McAlester, Okla., operations in August.

There has been significant interest in the division’s potential value, potential buyers and how a sale may affect Spirit, Wells Fargo Securities senior analyst Sam Pearlstein wrote in an analyst report last week.

With a sale, Spirit would reduce its exposure to the challenging Gulfstream G280 and G650 business jet programs. And although a buyer would absorb additional risk, it would not have to overcome all the investment incurred by Spirit.

The Oklahoma plants produce profitable wing components for Boeing’s 737 and 777 aircraft, Pearlstein wrote.

But potential risks in the Gulfstream programs, which have incurred major forward-loss charges, would likely result in a discounted price and sales valuation when compared to other aerostructure companies.

Given the challenging programs in the operations, Pearlstein estimates the division could be worth $400million to $500million.

A sale of the division by Spirit would be viewed favorably by investors of Spirit stock, Pearlstein wrote. But the earnings per share dilution might be a negative surprise, he said.

Spirit would divest of an estimated $325million to $375million of zero margin revenue on the G280, G650, Boeing 747-8 and 787 wings, Pearlstein wrote. But it also would divest of profitable annual sales of $450million to $500million in Boeing 737 and 777 work.

Pearlstein said if the successful buyer was Triumph Group, it would be viewed positively, given Wells Fargo’s analysis, Pearlstein wrote.

However, “it is far from clear that (Triumph) would be involved in this transaction,” he wrote.

Spirit is working to narrow down a potential buyer from a small pool to one, Lawson said. The timing of a sale is difficult to predict.

The 1.9-million-square-foot Tulsa factory, next to the Tulsa International Airport, produces wing structures and other components for Boeing 737NG, 747, 777 and 787 jetliners.

It builds the wings for the Gulfstream G280 and G250 business jets. It also rebuilds Airborne Warning and Control System radomes, and it has worked on the AC-130U Gunship and the Joint Unmanned Combat Air System.

Spirit’s 135,000-square-foot plant in McAlester, 90 miles from Tulsa, builds parts and subassemblies.

The sale of Spirit’s Oklahoma operations would include facilities, tooling, equipment and programs – “the entire site as an ongoing operation,” Lawson said in August.

The company said it would package the deal in different ways based on buyers’ interests, he said at the time.

Spirit’s Tulsa plant began in 1962 as North American Aviation, which built the Hound Dog Cruise Missile for the U.S. Air Force.

In 1967, the company merged with Rockwell Standard Corp., becoming Rockwell International.

Boeing bought the operation from Rockwell in 1996.

The Oklahoma operations were included in the 2005 transaction when Boeing sold its Wichita commercial aviation operations to Onex Corp., becoming Spirit.

Over the decades, the site has built parts for the Apollo spacecraft, Saturn rocket, the space shuttle, the B-1B, Global Hawk, the International Space Station, Joint Strike Fighter and Boeing commercial airliners.

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Spirit Aerostructures operations in Oklahoma provide integrated wing structures and a diverse line of aerospace products and services, including design, build, support and spares/repair. We also manage a global supply base that provides best value for our customers.

The manufacturing facility in Tulsa, Okla., fabricates Boeing 737NG, 747-8, 777 and 787 composite and metallic wing components as well as metallic and composite floor beams for the 777 and 787 programs. Military program involvement includes the E3 AWACS radomes, engine cowls and rudders.

Current programs at the Tulsa site include development and production of composite and metallic wing components for the Boeing 737NG, 747-8, 777 and 787 product lines. The site is responsible for the design and delivery of a fully integrated wing for the G280 and the G650 aircraft. Spirit’s expertise on military programs is being used to produce the E-3 AWACS IFF and radar radomes, engine cowls and rudders.

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