By Chelsey Dulaney and Jon Ostrower
Spirit AeroSystems Holdings Inc. said Tuesday it agreed to
transfer its Tulsa, Okla., wing-part assembly business to Triumph
Group Inc. after searching for a buyer for the struggling site for
more than a year.
Under the terms of the transfer, which includes both the G650
and G280 Gulfstream wing programs, Spirit will make a $160 million
cash payment to Triumph. The transfer carries and estimated loss of
$205 million to $235 million for Spirit, but is expected to
generate a cash tax benefit of $220 million to $230 million.
The plant fabricates wing parts for Gulfstream Aerospace Corp.,
a unit of General Dynamics Corp., but has been hurt by nearly a
billion dollars in cost overruns. Like Boeing Co., Gulfstream's
experience outsourcing the wings to Spirit prompted it to bring
production back in-house at its Savannah, Ga., campus for its new
G500 and G600 business jets, currently under development.
Triumph executives said Tuesday morning on a call with investors
the deal was a "complicated transaction" as both programs had
struggled during development and early production and it sought a
fair agreement with both Spirit as well as Gulfstream and Israel
Aerospace Industries Ltd., which assembles the G280.
The programs will be a "source of future growth" as older Boeing
and Gulfstream programs wind down, wrote UBS Investment Research
analyst David Strauss.
Triumph estimates the Gulfstream programs will immediately add
to per-share earnings and could contribute about $250 million in
annual revenue once the deal closes, which is expect at year's
end.
The deal's announcement came the same day that Boeing confirmed
it would cut production of its 747-8 from 1.5 of the jumbo jets a
month to 1.3 starting in September. Both Spirit and Triumph supply
major portions of the jet. Triumph said it didn't immediately have
an assessment of the cut in production.
Spirit first announced plans to sell the plant, along with
another Oklahoma facility, in August 2013 after a strategic review
of its operations under Chief Executive Larry Lawson, who took over
the previous April.
Meanwhile, Spirit has continued to aggressively cut its internal
costs and on Tuesday said it would evaluate the remaining work at
its other Tulsa programs. The company builds significant components
for Boeing's 737, 747, 777 and 787 jetliners in Oklahoma. Boeing
programs accounts for more than 80% of Spirit's annual sales.
"There are a number of factors to take into consideration,
including exploring our options within the community and with other
constituents who have approached us. We won't rush the evaluation
and will provide an update as soon as we are ready," Mr. Lawson
said in a statement.
Spirit's stock closed at an all-time high Tuesday at $45.32 per
share, up 4.3% or $1.86 during the trading day. Triumph's share
rose 23 cents, or 0.3%, to $68.55 per share.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com and Jon
Ostrower at jon.ostrower@wsj.com
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