Following rival Airbus's takeover of the C-Series product from Bombardier Aerospace on July 1, Boeing has announced that it has entered into a strategic partnership with Embraer for the formation of a joint venture comprising the Brazilian manufacturer's commercial aircraft and services business.
In a statement announcing the signing of a Memorandum of Understanding with Embraer, Boeing said the JV would strategically align with its commercial development, production, marketing and lifecycle services operations. Under the terms of the non-binding agreement, Boeing will hold an 80% ownership stake in the joint venture valued at USD3.8 billion with Embraer owning the remaining 20%, valued at USD950 million.
"By forging this strategic partnership, we will be ideally positioned to generate significant value for both companies' customers, employees and shareholders – and for Brazil and the United States," Dennis Muilenburg, Boeing's Chairman, President and Chief Executive Officer, said in a statement. "This important partnership clearly aligns with Boeing's long-term strategy of investing in organic growth and returning value to shareholders, complemented by strategic arrangements that enhance and accelerate our growth plans."
He added that Boeing and Embraer would benefit from a broader scale, resources and footprint, including global supply chain, sales and marketing, and services network, which would enable them to capture benefits from best-in-class efficiencies across the organizations. Additionally, the strategic partnership would provide opportunities to share best practices in manufacturing and across development programs.
The joint venture would become one of Boeing's centres of excellence for end-to-end design, manufacturing, and support of commercial passenger aircraft, and would be fully integrated into Boeing's broader production and supply chain.
Boeing and the joint venture would be positioned to offer a comprehensive, highly complementary commercial airplane portfolio that ranges from 70 seats to more than 450 seats and freighters, offering best-in-class products and services to better serve the global customer base. 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.
On finalization, the commercial aviation joint venture will be led by Brazil-based management, including a President and Chief Executive Officer. Boeing will have operational and management control of the new company, which will report directly to Muilenburg.
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.
