Spirit AeroSystems is expected not to complete a planned $420 million acquisition of Belgian component manufacturer Asco, just a week before the deadline for completion.

The component manufacturer has also cast doubts over the closure of its $500m purchase of Bombardier’s commercial aviation business set to complete at the end of October. The airframe and component manufacturer has said the European Commission was unlikely to approve its purchase of component manufacturer Asco by the October 1 deadline.

Purchase will terminate if deal not completed by deadline

The agreement states that the purchase will “automatically terminate” if a deal does not complete by that date and Spirit does not intend to extend the deadline.

In a regulatory filing on September 22, Spirit stated: “The conditions to the Asco acquisition have not been satisfied and the company does not expect to extend the Asco end date. The company’s management believes it is unlikely that the [European Commission] condition will be satisfied by the Asco end date.”

The company also cast doubt on the completions of a second deal for Bombardier’s commercial aircraft, stating “there can be no assurances” that the conditions relating to that acquisition would be met by the October 31 deadline

SpiritAerosystems had listed a number of outstanding closing conditions which had not been met including terms relating to “material adverse change” to Bombardier commercial aerospace businesses. The regulatory filing also mentioned conditions relating to “legal impediments” and “third-party consents”.

Components manufacture hit by pandemic and 737 MAX grounding

Spirit has secured additional funding in recent months; with a $1.2 billion financing deal in April and is working to close another $800 million loan. The company has been hit by a drop off in demand for fuselage production as a result of the COVID-19 pandemic and due to the continued grounding of the Boeing 737 MAX, which had previously generated roughly half of Spirit’s revenue.

The deals with Asco and Bombardier were mooted last year and were intended to diversify the company’s portfolio within aerospace and defence away from reliance on the 737. The agreement between Spirit and Asco was signed in May 2018 and was initially for $650 million to purchase Asco via subsidiary Spirit AeroSystems Belgium Holdings but a discount to $420m was achieved through renegotiations following a number of regulatory hurdles and a cyberattack against Asco,

The expected close date of the Asco deal had been pushed back by Spirit while the European Commission reviewed competitive concerns. Negotiations had been progressing amid a broader US-Europe trade spat.

Spirit has cut 8,000 jobs

The Bombardier agreement was reached and followed a decision to streamline the business into production of business jets. The deal included acquisition of a wing-manufacturing site in Ireland, manufacturing in Morocco and a maintenance and overhaul site in Dallas.

Spirit lost $356 million in the second quarter of 2020, down from a $168 million profit in the same period of 2019.In mid-August, Spirit CEO Tom Gentile said the company had funds to complete both acquisitions. The company has cut 8,000 jobs – 44% of its workforce.

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