Boeing approaches Woodward as services unit hunts for deals

Published 1:30 am Thursday, February 8, 2018

By Julie Johnsson and Matthew Monks / Bloomberg

Boeing has held preliminary talks with aircraft-parts supplier Woodward Inc. as it scouts potential targets to help build a new division into a $50 billion behemoth, said people familiar with the talks.

The discussions have been going on for months and no deal is imminent, nor is there any guarantee Boeing would reach a final agreement with Woodward, said the people, who asked not to be identified because the talks are confidential.

A joint venture may be more likely than an acquisition since about 35 percent of Woodward’s sales are to energy companies, George Godfrey, an analyst with C.L. King & Associates, said in a report to clients Thursday. Woodward’s aerospace business also has a jet-engine partnership with General Electric Co. that might prove difficult for Boeing to unravel.

“We would be surprised if a takeover of the whole company is completed by Boeing,” Godfrey said.

The Fort Collins, Colorado-based firm’s stock rose 9.8 percent to $84.77 at 1:35 p.m. in New York. Earlier shares surged as high as 16 percent, the biggest intraday gain since July 2014. Boeing fell 2.7 percent to $337.

Boeing has been looking to joint ventures and acquisitions as it works to beef up a new division, created last year, to provide maintenance, spare parts, retrofits and other services to airline and military customers. Chief Executive Officer Dennis Muilenburg has set a target of expanding service division sales from $14.6 billion to $50 billion over the next decade.

The Chicago-based manufacturer has been taking over work previously performed by its suppliers as it builds a portfolio of highly profitable spare parts to be sold to airlines on the aftermarket. The areas targeted by the company include actuators — a specialty of Woodward’s — along with avionics, seats and engine covers known as nacelles.

Boeing last month unveiled a new venture with Adient Plc, a leading supplier of automobile seats, to create premium, lie-flat seats for airlines.

A similar structure might allow Boeing to sidestep complicated negotiations with GE, a critical trade partner, over GE’s pact with Woodward, Godfrey said. The 50-50 joint venture designs and manufactures fuel components for several GE engines, he said.

Woodward, with a market value of about $5 billion, builds control systems for turbine engines as well as actuators — motors that control a range of motion within aircraft components. The company also provides controls to the energy sector, from producers of electricity to companies drilling for oil and gas, according to its website.

A Boeing spokeswoman declined to comment on the talks, while a Woodward representative couldn’t immediately be reached.

Boeing, the largest U.S. industrial company by market value, is also in talks to form a commercial joint venture with Embraer SA that would expand its commercial plane lineup and reap additional sales for Boeing Global Services, the new division.