Boeing and Embraer have announced they have signed a memorandum of understanding to establish a strategic partnership.
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.
"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," said Dennis Muilenburg, Boeing's chairman, president and CEO. "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.”
"The agreement with Boeing will create the most important strategic partnership in the aerospace industry, strengthening both companies' leadership in the global market," said Paulo Cesar de Souza e Silva, Embraer CEO and president. "The business combination with Boeing is expected to create a virtuous cycle for the Brazilian aerospace industry, increasing its sales potential, production, creating jobs and income, investments and exports, and in doing so, adding more value to customers, shareholders and employees."
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. The proposed partnership is expected to be accretive to Boeing's earnings per share beginning in 2020 and to generate estimated annual pre-tax cost synergies of approximately $150 million by year three.
On finalisation, 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, which will report directly to Muilenburg.
