Boeing and Embraer to enter strategic partnership

Boeing (Chicago, IL, US) and Embraer (São Paulo, Brazil) announced July 5 they have signed a Memorandum of Understanding to establish a strategic partnership that positions both companies to accelerate growth in global aerospace markets.

The non-binding agreement proposes the formation of a joint venture comprising the commercial aircraft and services business of Embraer that would strategically align with Boeing's commercial development, production, marketing and lifecycle services operations. Under the terms of the agreement, Boeing will hold an 80% ownership stake in the joint venture and Embraer will own the remaining 20% stake. The transaction values 100% of Embraer's commercial aircraft operations at $4.75 billion, and contemplates a value of $3.8 billion for Boeing's 80% ownership stake in the joint venture. 

On finalization, the commercial aviation joint venture will be led by Brazil-based management, including a president and CEO. Boeing will have operational and management control of the new company.

The joint venture will become one of Boeing's centers for end-to-end design, manufacturing, and support of commercial passenger aircraft, and will be integrated into Boeing's broader production and supply chain. Boeing and the joint venture would be positioned to offer a commercial airplane portfolio that ranges from 70 seats to more than 450 seats and freighters.

In addition, both companies will create another joint venture to promote and develop new markets and applications for defense products and services, especially the KC-390 multi-mission aircraft, based on jointly-identified opportunities.

Finalization of the financial and operational details of the strategic partnership and negotiation of definitive transaction agreements are expected to continue in the coming months. Upon execution of these agreements, the transaction would then be subject to shareholder and regulatory approvals, including approval from the Government of Brazil, as well as other customary closing conditions. Assuming the approvals are received in a timely manner, the transaction is expected to close by the end of 2019, 12-18 months after execution of the definitive agreements.