Sale of Spirit’s Oklahoma sites appears closer, according to business publication
06/20/2014 11:17 AM
08/08/2014 10:25 AM
The sale of Spirit AeroSystems’ Oklahoma sites appears to be getting close, with GKN plc the likely buyer for wing assembly operations, according to a new report in The Deal, a publication that tracks business deals.
Spirit put its plants in Tulsa and McAlester, Okla., up for sale in August, following a review by Spirit’s new CEO Larry Lawson.
The sale has moved in “fits and starts, raising some doubts as to whether the units would eventually be sold,” The Deal report said.
Sources have told the publication that delays have been caused by valuation concerns and by an uptick in return on some of the operations that are up for sale, it said.
“In recent months the review has become more complicated, the sources said, with Spirit now considering divesting only some of the weaker performing wing assembly assets, and perhaps carving out other operations to make the purchase more palatable to would-be buyers or to recoup losses if the Oklahoma businesses don’t get the valuation Spirit desired,” the report said.
Spirit could split off the unprofitable business of making components for Gulfstream business jets from the more lucrative Boeing contracts performed at the site, “perhaps selling the money-losing units at a loss,” it said.
Separately, sources have said that Spirit is considering selling its parts fabrication work in Wichita to an outside buyer.
Rumors circulating around Spirit’s plants speculate that an announcement could come as early as July 2.
Bob Brewer, Midwest director of the Society of Professional Engineering Employees in Aerospace, Spirit’s engineering and technical and professional union, said he’s had some casual conversations this week with Spirit officials.
Now, “nothing leads me to believe that Wichita is going to announce the deals of the fab division here in July,” Brewer said. “It doesn’t discount the fact that Wichita may be doing some things going forward, but not at this time.”
Spirit officials have said that the company doesn’t respond to rumors or speculation.
Spirit’s Tulsa plant builds the wings for the Gulfstream planes and wing components for Boeing 737, 747, 777 and 787 commercial airliners.
Sterne Agee analyst Peter Arment, in a note to investors this week, highlighted three scenarios he said he believes are likely in the coming weeks or months that could result in higher Spirit stock prices.
The best scenario for Spirit stock would be for Spirit to pay a company to take the work on its Gulfstream programs in Tulsa, which are losing money, and keep the profitable programs there, Arment said.
It could pay a company to take the Gulfstream work with some of the cash proceeds it would get if it sold its Wichita parts fabrication business, he said.
That would provide the most upside to long-term investors, Arment wrote.
Another scenario would be to divest all of the Tulsa operations. That would be in line with expectations and result in a further “de-risking” of Spirit stock but with some loss in earnings power from the shedding of profitable programs, he wrote.
The least upside for Spirit stock would be for the company to retain its Tulsa wing operations, Arment wrote.
Lawson said earlier this year that it was continuing its work with potential buyers on a sale, but that it would keep the operations if things don’t work out with a buyer.
British-based GKN, a parts supplier to Boeing and Airbus, has long been rumored as a potential bidder.
In February, CEO Nigel Stein told investors that the company is always looking for acquisitions.
“It would be entirely logical to assume that GKN had an interest” in what Spirit has for sale, Stein told them.
Triumph Group has also said it’s interested in part of the Oklahoma operations.