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Woodward, Hexcel End Aerospace Merger Pact, Citing Pandemic

Woodward, Hexcel End Aerospace Merger Pact, Citing Pandemic

(Bloomberg) -- Woodward Inc. and Hexcel Corp. called off a merger agreement that would have created one of the world’s biggest aerospace and defense suppliers, adding to the list of deals that have been quashed by coronavirus pandemic.

  • The effects of the pathogen’s spread have forced each company to focus on its respective business and affected their ability to realize the benefits of the merger, the companies said Monday in a joint statement, which noted the pandemic’s particular effect on the aviation market.

Key Insights

  • The deal’s demise caps a period of fallen pacts, most noticeably, Xerox Holdings Corp.’s hostile $35 billion takeover bid for HP Inc., which was withdrawn last week. Over the past seven days, a higher volume of deals has fallen apart that has been announced, according to data compiled by Bloomberg.
  • The all-stock Woodward-Hexcel transaction, announced in January, would have created a company with annual revenue of $5 billion supplying Boeing Co. and Airbus SE and driven by the pursuit for more-efficient engines over the next 20 years. The agreement had valued Hexcel at $6.4 billion, based on stock values at the time.
  • The planned all-stock merger of equals was part of a years-long rush to consolidation within the defense industry, though the aerospace sector had been hurt by the grounding of Boeing’s 737 Max last year after two fatal crashes. Since the virus has spread, air travel has nearly vanished, sapping demand for aircraft.

Market Reaction

  • Woodward climbed 3.9% to $53.25 at 9:48 a.m. in New York. The stock had tumbled 57% this year through April 3, while the S&P 500 dropped 23%. Hexcel fell 3.4% to $30.52 Monday, having plunged 57% this year.

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  • Neither company will pay a termination fee as the decision to terminate the pact was mutual.
  • Additional details
  • Joint statement

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