Boeing and Embraer have approved the terms of a strategic partnership that will give Boeing an 80 percent stake in Embraer’s commercial aircraft and services operations through a joint venture, the companies announced through a joint press release today.
Boeing said it will pay $4.2 billion, up from $3.8 billion, for the ownership stake in the JV, which still requires approval by the Brazilian government.
“We are confident that this partnership will deliver great value to Brazil and the Brazilian aerospace industry as a whole,” said Embraer president and chief executive officer Paulo Cesar de Souza e Silva. “This alliance will strengthen both companies in the global market and is aligned with our long-term sustainable growth strategy.”
Under the agreement that values the JV at $5.25 billion—up from $4.75 billion when the JV was proposed through a memorandum of understanding on July 5, according to analysts at Bank of America Merrill Lynch—the JV will be led by management based in Brazil, including a president and chief executive officer. Boeing said it will have operational and management control of the “new company” that will report to Boeing chairman and CEO Dennis Muilenburg.
“Boeing and Embraer know each other well through more than two decades of collaboration, and the respect we have for each other and the value we see in this partnership has only increased since we announced our joint efforts earlier this year,” Muilenburg said.
Embraer will have consent rights for certain strategic decisions such as transferring operations from Brazil, the companies said.
Boeing said the proposed JV is expected to be neutral to its earnings per share in 2020 but accretive thereafter.
Embraer and Boeing also said they have agreed to terms of another JV to promote and develop new markets for Embraer’s KC-390, a multi-mission, medium-lift airplane. Terms of that JV call for 51 percent ownership by Embraer and 49 percent by Boeing.
The companies hope to close the commercial JV transaction by the end of 2019, which awaits approval from Brazil’s government, Embraer’s board of directors as well as shareholders and regulators.
The announcement comes days after a Brazilian appeals court overturned a December 5 ruling by a federal judge in São Paulo granting an injunction to block Embraer’s board of directors from approving the proposed deal.
This article was originally published on AINonline on December 17, 2018 by Jerry Siebenmark.
