Get ready for interesting times in the regional jet market after the Brazilian government approved Boeing’s $US4.2 billion bid to take a majority stake in a joint venture with Embraer.
The government’s approval of the deal covering Embraer’s commercial aircraft and services operations comes after the two companies last month approved terms for the joint venture.
The deal, first flagged in July but long expected, followed the decision by Airbus to take a controlling stake in Bombardier’s C Series Aircraft Limited Partnership (CSALP).
This allowed Airbus to add the Canadian company’s impressive C Series family to its aircraft portfolio and rename it the A220.
Read: Airbus, Bombardier tie-up adds A220 to an impressive portfolio
Boeing’s more ambitious transaction will see it take an 80 percent ownership of the joint venture for $US4.2 billion, with Embraer taking the remaining 20 percent.
It will pit Embraer’s E-Jet family against the A220s in regional and medium-haul markets.
Boeing and Embraer both welcomed the government’s decision as the US manufactuer outlined the next steps for the deal.
“Once Embraer’s Board of Directors ratifies its prior approval, the two companies will then execute definitive transaction documents,’’ Boeing said.
“The closing of the transaction will be subject to shareholder and regulatory approvals and customary closing conditions.
“Assuming the approvals are received in a timely manner, the transaction is intended to close by the end of 2019.”
The US company will have operational and management control of the new company and it will be led by Brazil-based management that will report directly to the US company’s chief executive.
Embraer will have to consent to strategic decisions such as the transfer of operations from Brazil.
Boeing said last month the partnership was expected to be neutral to its earnings per share in 2020 and accretive thereafter.
It estimated there would be annual pre-tax cost synergies of approximately $US150 million by the third year of operations.
“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,” Boeing chief executive Dennis Muilenburg said in the December announcement.
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.
Under the terms of this proposed partnership, Embraer will own a 51 percent stake in the joint venture, with Boeing owning the remaining 49 percent.
