The planned US$6.4 billion all-stock merger between two major aerospace and defense suppliers, Hexcel Corp and Woodward Inc, has been abandoned by mutual consent in light of the ravages the effects of the COVID-19 pandemic are having on the aerospace industry.
With the companies’ two principal customers Boeing and Airbus cutting back on or halting production of certain aircraft models, the merger would have created the world’s largest aerospace and defense suppliers with the ability to generate free cash flow in the region of US$1 billion on an annual basis.
The deal was agreed back in January this year, against a continuing backdrop of Boeing struggling to get its grounded 737 MAX jet back in the air and its subsequent decision to halt production altogether. With potential for the merger to fail and the problem to be lain at the doorstep of the merger itself and not the COVID-19 outbreak, it made no sense for the two companies to continue going down the merger route and as the decision has been a mutual one, there will be no termination fee to pay by either party.
According to Reuters news agency, Airbus is considering a drastic cut in production numbers for the popular A320 owing to multiple requests from carriers to now delay deliveries, while the European planemaker has also advised suppliers to reduce expected parts’ demand by 50% for the larger A350 as it plans to reduce output from 9.5 to 5 aircraft per month.
The Hexcel and Woodward deal is the first in the aerospace industry to collapse as a result of the COVID-19 pandemic, while elsewhere it has been reported that Xerox Holdings Corp has turned its back on its hostile US$35 billion cash-and-stock bid for HP Inc.
