American plane giant Boeing and Brazil’s Embraer have agreed the terms of the joint venture which will create a strategic partnership to target growth in the global aerospace market. The partnership, in which Boeing will have an 80% stake and Embraer 20%, will comprise the current commercial aircraft and services operations, which will be hived off from Embraer S.A., the Brazilian aerospace conglomerate which produces commercial, military, executive and agricultural aircraft, and provides aeronautical services. The joint-venture will still be subject to Brazilian government approval, after which transaction documents will be executed, subject to shareholder and regulatory approvals and customary closing conditions.
The cost of Boeing’s 80% share is US$4.2 billion. The partnership is expected to be neutral to Boeing’s earnings per share in 2020 and accretive thereafter. Estimated annual pre-tax cost synergies of approximately $150 million are anticipated by the third year of operations.
The new company will be headed by Brazilian-based management, with Boeing having operational and management control, both reporting directly to Dennis Muilenburg, Boeing chairman, president and chief executive officer.
“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,” said Dennis Muilenburg.
“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 chief executive officer.
The companies have also agreed to the terms of another joint venture to promote and develop new markets for the multi-mission medium airlift KC-390 where Embraer will own a 51% stake and Boeing the remaining 49%.
