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Embraer aims for Brazil approval of JV by early November

Embraer expects to secure approval for its proposed commercial aviation joint venture with Boeing within the current administration of Brazil president Michel Temer, before a new government takes over in 2019 following elections in October.

Embraer needs to reach a definitive agreement with Boeing for the joint venture, and plans to present it for approval by the Brazilian government around end-October or early November at "the latest", says Embraer chief executive Paulo Cesar de Souza e Silva in a call with investors.

Under the proposed joint venture, neither Boeing and Embraer will be able to sell their stakes in the joint venture for a period of 10 years from the close of the deal. Boeing will pay $3.8 billion for a 80% stake in the joint venture, with Embraer holding the remaining 20%.

The Brazil government, which holds a golden share in Embraer, has the right to block the proposed joint venture. Approvals by Embraer's shareholders are expected around early to mid-December following government approvals, adds Silva.

The transaction also requires approvals by anti-trust regulators in at least 10 jurisdictions, including Europe and China, say Embraer executives.

The Brazilian manufacturer says it does not expect any major regulatory hurdles, as it points to the eight months it took for Airbus and Bombardier to gain approvals for Airbus taking a majority stake in the CSeries programme. Boeing and Embraer expect to close their proposed joint venture by end-2019.

The planned joint venture will assume all of Embraer's debt related to its commercial aviation segment. While Embraer says this constitutes a "good amount" of the company's overall debt, its executives were not able to specify an exact figure.

Silva points to several factors including industry consolidation and growing markets like China as among reasons driving the planned joint venture. "This partnership makes a lot of sense," he says. "For Embraer, it means we will have better access to markets with Boeing and access to Boeing's clients. There is also a possibility for Boeing to tap into different airlines and clients with the E2."

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