ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Monday, December 16, 1996 TAG: 9612160098
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: Associated Press
Boeing Co. jolted the aerospace world Sunday with a $13.3 billion deal to buy McDonnell Douglas Corp., reducing the number of major commercial aircraft makers in the world from three to two.
The deal announced Sunday is akin to reducing America's Big Three automakers to just two, leaving Boeing and Europe's Airbus as the main commercial competitors. It also transforms two major defense contractors into a single giant with a hand in every fighter aircraft the Pentagon is buying and many other weapons as well.
Corporate chiefs insisted this deal would not lead to thousands of layoffs. Indeed, Boeing is anticipating new hires to meet a booming commercial business. But Boeing will be looking for savings of $1 billion a year and did not specify how that would be achieved.
``The fact that we are able to do this without really impacting the work force significantly, that's really attractive,'' said Harry Stonecipher, McDonnell Douglas' chairman and chief executive officer.
If approved by stockholders and federal regulators who enforce antitrust laws, the combined company under Boeing's name anticipates sales of $48 billion next year. Its headquarters would be in Seattle, where Boeing is based, while St. Louis-based McDonnell Douglas would continue under its own name as a major division of Boeing.
``This is, I believe, a historic moment in aviation and aerospace,'' said Philip Condit, president and chief executive officer of Boeing. ``We can get more done, we can meet new and exciting challenges, and we can solve significant problems.''
Condit will be the chairman and chief executive officer of the new company.
The officials said they anticipated federal approval in about six months for the deal struck Tuesday with a handshake in Seattle between Condit and Stonecipher, and approved late Saturday by the two corporate boards.
The two companies had talked off and on about a merger for nearly three years.
The combined company will have operations across the spectrum of aerospace, from commercial aircraft to military planes to space satellites and launch vehicles. Its work force will number nearly 200,000 across 26 states.
Although the companies characterized it as a merger, the terms clearly show Boeing is buying McDonnell. McDonnell shareholders will receive 0.65 shares of Boeing stock for each share they own, a deal worth $13.3 billion.
McDonnell's operations will be melded into Boeing's and the top officer and two-thirds of the board of directors will be Boeing people.
Combining the companies ends the storied life of McDonnell Douglas as an independent firm, maker of the Mercury and Gemini space capsules and once the world's dominant manufacturer of military planes such as the F-4 Phantom. McDonnell is the nation's second-largest defense contractor, behind Lockheed Martin Corp. Boeing ranks ninth.
House Minority Leader Dick Gephardt, D-Mo., predicted the deal would ``resolve some of the uncertainty about the future of McDonnell Douglas,'' but said ``numerous questions will arise'' about the transaction.
Jerry Oulson, a Machinists' union president at McDonnell Douglas, said he was ``cautiously optimistic'' about the job implications.
McDonnell Douglas had been struggling to keep up its commercial aircraft business, hurt by competition from Boeing and Airbus Industrie consortium. Stonecipher said McDonnell Douglas had outstanding orders for about 40 commercial aircraft, compared with orders in the hundreds for competing planes.
The deal follows a key Pentagon decision last month that knocked McDonnell Douglas out of the competition to build the new Joint Strike Fighter. Boeing was chosen as one of the two finalists, along with Lockheed Martin. Boeing is a major contractor in the Air Force F-22 while McDonnell Douglas is building the upgraded Navy F-18 fighter.
For Boeing, the deal provides a defense business balance to a company that had been weighted heavily toward the commercial side.
The Joint Strike Fighter would be the first fighter aircraft built by Boeing since before World War II. In August, Rockwell International Corp., known for B-1 bombers and space shuttles, agreed to sell the bulk of its aerospace and defense businesses to Boeing in a $3 billion deal.
Major Boeing products include Boeing 777 and 747 commercial airliners, the F-22 fighter, the AWACS radar plane, the Comanche helicopter and portions of the space shuttle.
LENGTH: Medium: 84 linesby CNB