Bombardier, a leading manufacturer of planes and trains has reached into a definitive agreement to sell select assets to Spirit AeroSystems, one of the world’s largest tier-one manufacturers and suppliers of aerostructures. It is also acquiring aftermarket service businesses in Belfast, U.K.; Casablanca, Morocco; and its aerostructure maintenance, repair and overhaul (MRO) facility in Dallas, U.S.A. The deal involves assumption of liabilities, including pension obligations. The assets and after-market service business are being acquired for a cash consideration of $500 Million. Additionally, Spirit Aerosystems is assuming approximately $300 Million in net pension liabilities and approximately $290 Million of government grant repayment obligations, for a total enterprise valuation of $1090 Million, which is equals to 10 times the 2019 estimated adjusted EBITDA of the acquired business. The transaction is expected to close in the first half of 2020 and is subject to regulatory approvals and customary closing conditions.
Spirit AeroSystems claims that the acquisition is in line with Spirit’s growth strategy of increasing Airbus content, developing low cost country footprint and growing their aftermarket business. The Bombardier operations will bring synergies by bringing engineering expertise and add to a robust track record of innovation. The Deal would be strategic for Spirit as the acquired business would bring a world-class aftermarket business which more than doubles Spirit’s geographic reach globally.
The move also benefits Bombardier in the sense that the move is part of Bombardier’s plan to shed its commercial aviation business and focus on its higher-margin business jets and rail division. The Belfast factory will continue to remain a major supplier to Bombardier’s business jet programmes.
A Spokesperson for Bombardier said that there would be no workforce adjustments and Bombardier’s employees will be transferred to Spirit including those at smaller operations in US and Morocco. The Unite union is of the opinion that the acquisition has a hope for a positive future for Bombardier workers in Northern Ireland as Bombardier was once on the brink of insolvency and a new owner for the Belfast operations should bring some stability for the workforce and a long-term focus on the business. The GMB union said that it would be seeking talks with Spirit’s management ‘to get assurances on jobs, terms and condition and pensions.’
The transaction is subject to regulatory approvals and customary closing conditions. Spirit’s press release cautioned that the expected profits and revenues are only forward-looking statements and could be susceptible to uncertainty and changes in circumstance.
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