Boeing stake in Embraer JV valued at $US4.2 billion

December 19, 2018
Embarer Boeing partnership $US4.2 billion
Image: Embraer.

Boeing and Embraer have moved a step closer to a proposed joint venture after the companies approved the terms of the deal and valued the US manufacturer’s stake in the alliance at $US4.2billion.

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.

The US 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.

The deal is still subject to approval by the Brazilian government, after which the partners will execute definitive transaction documents, as well as shareholders and regulators.

The companies hope to complete the deal by the end of 2019 and have no doubt been buoyed by reports of favorable comments about it by incoming Brazilian president Jair Bolsonaro, and his aides.

Boeing said the partnership was expected to be neutral to its earnings per share in 2020 and accretive thereafter.

It also 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 a statement.

Embraer boss Paulo Cesar de Souza e Silva said Embraer was confident the partnership would 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,” he said.

Analysts are also looking at the deal favorably.

New York-based analysts Bernstein said earlier this year that it saw the Boeing Embraer JV as “an acquisition of a profitable program portfolio, plus the capture of significant operational capabilities for engineering, manufacturing, flight test, and component sourcing”.

In another deal, the companies agreed to the terms of a  joint venture to promote and develop new markets for the multi-mission medium airlift KC-390.

Embraer will own a 51 percent stake in the joint venture, with Boeing owning the remaining 49 percent.