The Market Monitor Minding the Nation's Business
Boeing will take control of the commercial business of Brazil’s Embraer, the companies announced recently, better positioning the US aerospace giant to compete with rival Airbus in the market for smaller jets.
The announcement follows months of talks to allay concerns of the Brazilian government, which had veto power over the transaction and initially resisted ceding control to the US company.
Under the terms of the deal, Boeing will hold 80% stake in the commercial part of Brazil’s Embraer which is valued at $4.75 billion, the companies said.
The deal would allow Boeing to offer planes with capacity up to 150 seats, a market it does not currently compete in.
It follows a similar strategic partnership by European arch-rival Airbus with Canada’s Bombardier last October.
The American firm will have operational and management control over the new venture, which will be led by a Brazil-based chief who will report to Boeing chief executive Dennis Muilenburg.
The companies are creating another joint venture to promote their defense products and services, especially Embraer’s KC 390, a military transport aircraft.
Embraer’s CEO and president Paulo Cesar de Souza e Silva said the tie-up would create a “virtuous cycle” for Brazilian aerospace, increasing sales potential and production and consequently adding value for shareholders and employees.
The companies said financial and operational details were still being finalized, a process which would continue over several months, after which the deal would be subject to shareholder and regulatory approval, including by the government of Brazil.
Executives of the two companies have been in negotiations since news of the talks was reported in December. Agence France-Presse