Boeing and Embraer recently signed a Memorandum of Understanding to create a strategic partnership to accelerate growth in global aerospace markets.
The agreement, which is non-binding, proposes a joint venture comprising the commercial aircraft and services business of Embraer and the commercial development, production, marketing and lifecycle services operations of Boeing. Under the agreement, Boeing would hold an 80 percent ownership stake in the joint venture, and Embraer would own the remaining 20 percent 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,” Dennis Muilenburg, Boeing’s chair, president and CEO, said. “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.”
Once finalized, Brazil-based management, including a president and chief executive officer would lead the joint venture. Boeing would have operational and management control of the new company, which would report directly to Muilenburg.
The companies also plan to create another joint venture to promote and develop new markets and applications for defense products and services, such as the KC-390 multi-mission aircraft.
“Joint investments in the global marketing of the KC-390, as well as a series of specific agreements in the fields of engineering, research and development and the supply chain, will enhance mutual benefits and further enhance the competitiveness of Boeing and Embraer,” Nelson Salgado, Embraer’s executive vice president of financial and investor relations, said.
Negotiation of final transaction agreements and finalization of the financial and operational details of the partnership are expected to continue in the coming months. The transaction would, upon execution of these agreements, be subject to shareholder and regulatory approvals as well as other customary closing conditions.
Pending approvals, the transaction is expected to close by the end of 2019, 12 to 18 months after execution of the definitive agreements.
Boeing and Embraer will benefit from a broader scale, resources, and footprint, and the strategic partnerships will provide opportunities for the companies to share best practices.
“This strategic partnership is a natural evolution of the long-standing history of collaboration between Boeing and Embraer on a range of aerospace initiatives over almost three decades,” Greg Smith, Boeing chief financial officer and executive vice president of Enterprise Strategy & Performance, said. “It is aligned with Boeing’s enterprise strategy of pursuing strategic investment opportunities where they demonstrate real value and accelerate our organic growth plans. This partnership will strengthen the vertical capabilities of Boeing and enhance value for our customers through the full lifecycle of industry-leading products and services.”