Embraer, Boeing joint venture cleared for takeoff by government

The government of Brazil approved the strategic partnership between Boeing and Embraer, on January 10, 2019, putting an end to a month of judiciary skirmishes. Both manufacturers welcomed the decision, and should now be able to finalize the merger.

The approval was signed following the entry into office of the newly elected Brazilian president, Jair Bolsonaro. Throughout his campaign, the then-candidate defended the project to protect Embraer against rivaling Airbus-Bombardier alliance.

Bolsonaro’s decision follows a month of back and forth between the Brazilian federal court and the government’s lawyer. In December 2018, Judge Victorio Giuizio Neto blocked the project twice, before his injunctions were overturned.

A day after the partnership was given the green light, on January 11, 2019, the board of Embraer announced it ratified its prior approval of the merger with Boeing. The two manufacturers should now proceed to “execute the final transaction documents”.

The project will then be submitted to the approval of shareholders and regulators. “Assuming the approvals are received in a timely manner, the transaction is intended to close by the end of 2019,” forecasted the Brazilian manufacturer in an official statement.

This new joint venture would see Boeing own a 80% stake, valued at $4.2 billion, while Embraer will hold the remaining 20%.The new company should be led by a Brazilian-based management team with a president and a CEO. Boeing will have “operational control and management”.

Boeing will now be able to compete with Airbus and Bombardier that formed a similar partnership on July 1, 2018, by enriching its own catalogue with smaller airplanes, like the new E-Jets series. On the other hand, Embraer should benefit from Boeing’s commercial power.

Brazilian authorities were initially concerned of losing control over Embraer’s military division. But the two manufacturers since agreed on a second joint venture in which Embraer should hold a 51% and Boeing the remaining 49%. This other company should continue developing the KC-390 tactical transport and inflight refueling aircraft.

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