Embraer, Boeing agree to partner, seek Brazilian government approval

Embraer, Boeing agree to partner, seek Brazilian government approval

Boeing will control joint venture led by Brazil-based management; separate agreement to promote KC-390 airlifter.

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December 18, 2018

Embraer and Boeing management have approved terms for a joint venture of Embraer’s commercial aircraft and services operations, valued at $5.26 billion, with Boeing owning 80% ($4.2 billion) and Embraer holding a 20% stake. The transaction remains subject to approval by Brazil’s government, after which Embraer and Boeing intend to execute definitive transaction documents. The transaction’s closing will then be subject to shareholder and regulatory approvals.

Once the transaction has closed, the commercial aviation joint venture will be led by Brazil-based management, including a president and chief executive officer. Boeing will have operational and management control of the new company, which will report directly to Dennis Muilenburg, Boeing chairman, president, and CEO. Embraer will retain consent rights for certain strategic decisions, such as transfer of operations from Brazil.

"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.

"We are confident that this partnership will deliver great value to Brazil and the Brazilian aerospace industry as a whole. This alliance will strengthen both companies in the global market and is aligned with our long-term sustainable growth strategy," said Paulo Cesar de Souza e Silva, Embraer president and CEO.

The companies’ managers also agreed to terms for another joint venture to promote and develop new markets for the multi-mission, medium-airlift KC-390 aircraft. Under the terms of this proposed partnership, Embraer will own a 51% stake in the joint venture, with Boeing owning the remaining 49%.

The transaction is subject to approval by the Government of Brazil, ratification by the Embraer board of directors, execution of definitive transaction documents, and obtaining shareholder and regulatory approvals. The transaction is intended to close by the end of 2019.

At the end of November, Embraer successfully completed the troop unloading, evacuation by hatch, and evacuation tests through the front and rear doors of the KC-390 airlifter, complying with requirements for achieving final military certification of the aircraft, due to occur in the last quarter of 2019.

In early December, a Brazilian court issued an injunction against the commercial joint venture, brought by four congressmen with Brazil’s left-wing Workers Party. A few days later, the class-action measure was revoked by a Brazilian federal court of appeals.

Also, Brazil’s government has submitted details to the World Trade Organization to support its claim that $4 billion in subsidies from the governments of Canada and Quebec to regional-jet rival Bombardier for the C Series (now Airbus A220) violate Canada’s trade obligations.