Embraer and Boeing have welcomed approval by Government of Brazil of the strategic partnership that will position both companies to accelerate growth in global aerospace markets. The approval maintains the terms of the deal as previously proposed, with Embraer selling 80 percent of its commercial plane division, its most profitable, for $4.2 billion to Boeing, which will have total control of the new venture. Brazil’s new government has approved a proposed partnership between Embraer and Boeing, clearing a critical hurdle for a tie-up that was challenged in court by Brazilian politicians and labour unions.
The government’s approval comes after the two companies last month approved terms for the joint venture that will be made up of the commercial aircraft and services operations of Embraer. Boeing will hold an 80 percent ownership stake in the new company and Embraer will hold the remaining 20 percent. The deal also faces legal challenges in Brazil. Workers and left-wing politicians obtained court orders blocking the deal in December, but the injunctions were quickly reversed. The tie-up could face future injunctions as the cases remain pending. Minority shareholders have also filed legal complaints that have yet to be resolved.
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. The tie-up between Embraer and Boeing is seen as part of a reshaping of the global aviation market for mid-sized planes. Boeing and Embraer’s partnership plans were unveiled as Airbus took control of the Bombardier CSeries programme, now rebranded the Airbus A220.
Once Embraer’s Board of Directors ratifies its prior approval, the two companies will then execute definitive transaction documents. 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. Brazil, supported by Embraer, is in the midst of pursuing a separate dispute at the World Trade Organisation against Canada.
