Thursday, February 08, 2018

Boeing in Talks to Buy Aerospace-Parts Maker Woodward: Talks underscore the takeover appetite of Boeing; Woodward has market value of $5.1 billion

The Wall Street Journal
By Dana Mattioli,  Bradley Hope and  Doug Cameron
Updated February 8, 2018 5:41 p.m. ET

Boeing Co. is in talks to buy aerospace parts maker Woodward Inc., according to people familiar with the matter.

The companies have held talks over the past several months, according to one of the people. Should there be a deal, it would be substantial. Woodward had a market value of $5.1 billion at Thursday’s close. Boeing, the world’s largest aerospace company by revenue, was valued at $196 billion.

There is no guarantee the two sides will manage to strike a deal, and one doesn’t appear to be imminent.

Several hours after The Wall Street Journal reported on the talks, Woodward issued a news release saying that it “is not in discussions with Boeing over a possible acquisition of Woodward.”

The shares, which gained 7.5% to close at $82.93, gave back that and more after hours. Boeing shares fell 4.8% to $329.66 in regular trading amid a broad market decline.

After the statement, the people familiar with the matter said the companies remained in talks.

The talks underscore the takeover appetite of Boeing, which also is trying to buy part or all of Embraer SA, the Brazilian maker of smaller commercial jetliners and business jets.

A deal for Woodward would further Boeing’s effort to in-source more aircraft parts and cut costs to better compete with rival Airbus SE in a commercial-jetliner market worth an estimated $140 billion this year.

Boeing is pressing suppliers for better terms and building more of its own parts, including cockpit systems and actuators, the motors that control wing flaps and other systems.

Woodward, based in Fort Collins, Colo., makes both of these products for commercial and military aircraft, as well as an array of other items including engine parts, pumps and valves. The company, which also has an industrial-machinery business focused on the energy and utility sectors, had sales of $2.1 billion in fiscal 2017.

It isn’t clear what Boeing would do with this business, which had sales of about $750 million last year, if it bought Woodward.

Producing more in-house could help Boeing avoid some of the supply-chain snags affecting plane makers—many stemming from late delivery of engines and aircraft seats—and give it a bigger cut of the high-margin services and support market.

Boeing is flush with over $10 billion of cash and has become increasingly active in the deal arena as it boosts production to work through a backlog of more than 5,800 jetliners as well as defense equipment.

The Chicago company last year bought closely held Aurora Flight Sciences Corp., a maker of drones and pilotless flying systems.

Boeing Chief Financial Officer Greg Smith said at an investor event on Wednesday that talks with Embraer were progressing. Though the Brazilian company is viewed as a good strategic fit, he said a deal wasn’t a “must-do” unless it secured the right structure and terms.

In December, Boeing and Embraer confirmed that they are in talks after the Journal reported on the negotiations. The two sides remain in talks and are looking for ways to address the Brazilian government’s concerns about the potential tie-up. The government has a golden share in Embraer, giving it veto power over any transaction that would transfer control of the business.

Boeing is aiming to increase annual sales at its new services arm to $50 billion within a decade from $15 billion last year, though Chief Executive Dennis Muilenburg said last month that this will be mainly through organic growth rather than acquisitions.

A deal, if one were to be struck, would come at the same time aerospace companies are transacting at an unprecedented rate. Last year, there was $55 billion worth of deals in the sector, according to data provider Dealogic. That is the highest volume on record. Among the deals struck last year, United Technologies Corp. signed a $23 billion agreement to buy Rockwell Collins Inc. Northrop Grumman Corp. agreed to buy fellow defense contractor Orbital ATK Inc. for $7.8 billion.

Original article can be found here ➤

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