Wichita Boeing Co. is selling its commercial aircraft plants in Kansas and Oklahoma to a Canadian-based investment group, part of the aerospace giant's strategy to focus on design and final assembly.
Onex Corp. on Tuesday agreed to buy Boeing's commercial aircraft facility in Wichita, along with plants in Tulsa and McAlester, Okla., for $900 million cash and the assumption of $300 million in liabilities. Chicago-based Boeing has been trying to sell the plants for more than a year.
"Starting from a great foundation, our objective is to build the most efficient and innovative company in the aerostructures industry," Seth Mersky, a managing director of Onex, said in a statement announcing the sale. "There have been terrible job losses at these plants over the last several years. We confidently believe that can be reversed."
Onex's new aerospace company -- which has yet to be named -- would include investors from Boeing management. Also undecided is how many Boeing workers would be hired at the new company -- those decisions are still awaiting negotiations with union officials.
Boeing is Kansas' largest private employer; about 7,200 people work at the Wichita commercial plant, along with as many as 1,300 at the two smaller facilities in Oklahoma. Boeing's defense operations in Wichita, which employ approximately 5,000 workers, are not involved in the sale.
Separately, Boeing announced the sale of its Rocketdyne rocket engine subsidiary to United Technologies Corp., parent of jet-engine maker Pratt & Whitney, for about $700 million cash. Rocketdyne has sites and assets in California, Alabama, Mississippi and Florida and 3,000 employees.
Onex is paying Boeing about $900 million in cash and taking on about $300 million in liabilities. The deal includes long-term agreements for Onex to provide Boeing with parts -- including fuselage sections and wing elements -- on four of Boeing's existing planes and the new 787 Dreamliner, the company's next-generation jet. Mersky said Onex plans to invest $1 billion in Kansas and Oklahoma in the next five years and plans to seek business with other aircraft makers.
"If (Onex) can get additional business, which undoubtedly they should, they'll be adding to employment," said Paul Nisbet, an analyst with JSA Research. He expects the deal to lower Boeing's production costs. "I think everybody wins."
Boeing officials said the company had received bids from several interested parties, including some who wanted only part of the Wichita and Oklahoma operations.
"We thought Onex was the right buyer, at the right time, because of their track record working with employees, the unions, the community and their track record growing companies," said Jim Morris, senior vice president of supplier management for Boeing Commercial Airplanes.
Impact on Boeing
Shares of Boeing closed down 63 cents to $52.15 in trading Tuesday on the New York Stock Exchange. They are up about 1 percent this year after a 23 percent rise in 2004. Both sales were announced after the markets closed.
The companies expect to close the deal, which is subject to federal regulatory approval, in the second quarter of 2005. Onex plans to form a new company to run the plants, to be led by Jeff Turner, who is currently the vice president and general manager of Boeing's operations in Wichita and Oklahoma.
|Big sale: Toronto-based Onex Corp. has bought Boeing Co.'s commercial aircraft facility in Wichita along with plants in Tulsa and McAlester, Okla.How much?: Onex is paying about $900 million in cash and taking on about $300 million in liabilities.Job growth: Boeing laid off about 5,000 workers after the 9-11 terrorist attacks, but Onex said it believed losses could be reversed.|
The Wichita commercial plant houses Boeing's largest remaining segment of aircraft-component manufacturing, producing parts for all of the company's commercial jetliners except the 717, which is ending production next year.
"This agreement fully supports our strategy to focus Boeing on large-scale systems integration, which is where we are most competitive and can add the most value to our airplanes and services," said Boeing commercial airplanes chief Alan Mulally.
Boeing is operating its commercial production facilities at 50 percent capacity, by all accounts too low for optimal use, said Nigel Wright, Onex's managing director. As an independent company, Onex hopes to attract businesses from Boeing competitors such as Airbus and from smaller regional aircraft manufacturers.
Impact on Wichita
More than 15,000 aviation workers in Wichita lost their jobs in an industry downturn that accelerated after the Sept. 11 terrorist attacks.
"In a time when so many jobs and industries are leaving our shores, we're encouraged by Onex's willingness to invest in a showcase U.S. industry," said Tom Buffenbarger, president of the International Association of Machinists and Aerospace Workers, whose Wichita local represents nearly 6,000 Boeing employees.
Onex, one of Canada's largest companies, has global operations in service, manufacturing and technology industries. The company -- which boasts 140 acquisitions -- does not operate the businesses it acquires but works with local management teams.
Among its recent acquisitions, the conglomerate last week completed the purchases of two large U.S. health care firms for about $1 billion: American Medical Response Inc. and EmCare Holdings Inc., which between them have more than 22,000 employees.
Onex specializes in buying distressed companies it believes can be turned around with help from the conglomerate's financial and managerial expertise.
Rocketdyne, which had nearly $700 million in sales last year, supplied the main engines for the space shuttle in the 1980s and has continued to build booster engines for Atlas and Delta rockets. It became part of Boeing in 1996 when the company bought the aerospace divisions of Rockwell International.
Analysts had been anticipating the transaction as part of a consolidation of the U.S. launch vehicle industry.
Jim Albaugh, president and chief executive of Boeing's St. Louis-based defense unit, said the divestiture makes sense strategically even though the company intends to keep building launch systems. He said it "reinforces our strategic business aim to be horizontally -- not vertically -- integrated."
Boeing will continue to contract with Rocketdyne as a unit of Hartford, Conn.-based United Technologies, he said.