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Boeing and Embraer agree on terms for planned tie-up

Boeing and Embraer have agreed the terms of their planned joint venture under which the US manufacturer is set to take control of Embraer’s commercial aircraft activities in 2019.

The deal still is subject to approval by Brazil’s government, shareholders and regulatory authorities, the two airframers say.

Under the plan, Boeing will acquire for $4.2 billion an 80% shareholding in the joint venture comprising Embraer’s commercial’s aircraft activities, including aftermarket support services, while Embraer will hold the balance.

The new company is to have a Brazil-based management, including a chief executive and president. But Boeing will have operational and management control of the business.

“Embraer will retain consent rights for certain strategic decisions, such as transfer of operations from Brazil,” the manufacturers say.

Boeing foresees that the acquisition will be neutral to its earnings-per-share from 2020 and accretive thereafter.

The joint venture is expected to generate annual pre-tax cost savings worth $150 million from the 2022, the manufacturers say.

Boeing and Embraer have targeted the end of 2019 for completion of the transaction.

As part of the tie-up, the two manufacturers have also agreed a separate joint venture to market and sell Embraer’s KC-390 military transport

Embraer is set to have a 51% shareholding in that business, with Boeing holding the remainder.

The airlifter in October received its type certification from Brazilian regulator ANAC and is expected to reach Final Operation Capability and military certification by the end of 2019.

"We are confident that this partnership will deliver great value to Brazil and the Brazilian aerospace industry as a whole,” states Embraer chief executive Paulo Cesar de Souza e Silva.

“This alliance will strengthen both companies in the global market and is aligned with our long-term sustainable growth strategy.

Noting that Boeing and Embraer have collaborated for more than two decades, Boeing chief executive Dennis Muilenburg says the “respect we have for each other and the value we see in this partnership has only increased since we announced our joint efforts”.

Earlier this month, a Brazilian federal appeals court overturned an injunction against the planned commercial joint venture, which had been brought about by a group of Brazilian lawmakers in July.

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