Amid the ongoing acquisition talks between Boeing (NYSE:BA) and Spirit AeroSystems (NYSE:SPR), BA has proposed an all-stock offer to acquire two-thirds of Spirit’s business, according to the Wall Street Journal. It should be noted that the companies were nearing the completion of an all-cash deal worth $4 billion.
Spirit is a former subsidiary of Boeing and a supplier of its key parts, including the fuselage of the 737 and 787. It manufactures aerostructures for commercial, private, and military aircraft.
What Drove This Last-Minute Change?
At the last moment, Boeing changed the offer to fund the acquisition with stock instead of cash. This decision comes as the company grapples with significant cash burn due to ongoing production issues and supply chain disruptions.
It is worth mentioning that Boeing’s CFO, Brian West, raised doubts about the company’s ability to generate positive cash flow in 2024 due to slowdowns in jet production.
Another Major Development
As part of the deal, Spirit will divest operations that produce parts for Boeing’s competitor, Airbus (EADSY). These operations currently account for one-fifth of Spirit’s revenue.
However, the terms of this deal are still under discussion.
Importantly, this divestiture would help address a major hurdle for Boeing. Airbus previously threatened to block any acquisition that would allow Boeing to produce parts for Airbus’ new models.
Is BA a Good Buy Right Now?
Interestingly, five-star analyst Sheila Kahyaoglu from Jefferies maintained a Buy rating on the stock yesterday with a price target of $270, implying a 50.75% upside potential from the current level (to watch the analyst’s track record, click here).
Overall, Wall Street analysts have a Moderate Buy consensus rating on BA stock based on 17 Buys, seven Holds, and two Sells assigned in the past three months. After a 31.85% decline in its share price over the past six months, the analysts’ average price target on Boeing stock of $213.70 per share implies 19.32% upside potential.
