Boeing Wants to Buy Parts Maker -- WSJ
09 February 2018 - 7:02PM
Dow Jones News
Aerospace giant aims for Woodward deal to cut costs and avoid
supply-chain problems
By Dana Mattioli, Bradley Hope and Doug Cameron
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (February 9, 2018).
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."
Woodward shares gained 7.5% to close at $82.93, but were down
9.9% 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.
Write to Dana Mattioli at dana.mattioli@wsj.com, Bradley Hope at
bradley.hope@wsj.com and Doug Cameron at doug.cameron@wsj.com
(END) Dow Jones Newswires
February 09, 2018 02:47 ET (07:47 GMT)
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