July 25, 2013 / 5:03 PM / 5 years ago

UPDATE 1-Spirit Aerosystems starts layoffs amid bid talk

July 25 (Reuters) - Spirit Aerosystems said on Thursday that it was laying off about 360 workers in Kansas and Oklahoma, a step that came amid talk of a possible bid for the company by UK aerospace and car parts maker GKN.

The layoffs affect salaried support and management employees and are a strategic step to make the aerospace supplier more cost-competitive, Spirit said in a statement.

The company, based in Wichita, Kansas, makes airplane body sections for the best-selling Boeing 737 and Airbus A320 jets, as well as wing pieces and other components for other aircraft makers, including Bombardier, Gulfstream and Mitsubishi.

The layoffs come amid talk that UK car and aerospace supplier GKN might bid for part or all of the company.

Spirit’s shares rose 7.4 percent on Thursday after a British newspaper reported on a potential GKN offer.

Shares were up $1.78 to $25.85 in mid-day trading in New York. Earlier, the shares traded above their 52-week high of $25.86.

The Daily Mail said speculation about a bid rose on Wednesday, with dealers hearing GKN could launch “a $5 billion cash and shares bid, worth around $35 a share,” for Spirit.

The newspaper said Bank of America/Merrill Lynch was reported to be advising GKN. Other sources said a deal might be in the works for the wings business.

Ken Evans, a spokesman for Kansas-based Spirit, said the company declined to comment.

In March, Spirit named former Lockheed Martin executive Larry Lawson as president and chief executive, and is undergoing a strategic and financial review of its operations at four locations, including Kansas and Oklahoma. It suffered losses last year from cost overruns on some aircraft parts. Spirit was spun off from Boeing in 2005.

“If this report turns out to be true, then we think that it offers an excellent deal for Spirit’s shareholders,” RBC Capital Markets analyst Robert Stallard said in a note to clients on Thursday.

“Given the lack of profitability on its development programs, and a lack of cash generation, a bid at the reported level would seem extremely generous given the current situation,” Stallard added.

Jefferies analyst Sandy Morris expressed doubts about a GKN acquisition of Spirit. “My personal view is that perhaps one division of Spirit may be for sale, and that would be the wing systems division. I think that that’s much more likely,” Morris added.

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