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Friday, July 6, 2018

Boeing to Take Over Brazil's Embraer Commercial Jet Business Unit in $4.75-Billion Deal

American aircraft manufacturing giant Boeing is taking over the commercial jet business of Brazil’s Embraer, valued at $4.75 billion in a move that will allow it to compete more effectively in the medium-range aircraft market.

It follows a similar strategic partnership by arch-rival Airbus with Canada’s Bombardier last October.

Boeing to hold 80%

Under the terms of the deal, Boeing will hold an 80% stake valued at $3.8 billion, the companies said in a release on Thursday, while Embraer will hold the remaining 20%.

The proposed partnership is expected to be accretive to Boeing’s earnings per share beginning in 2020 and to generate estimated annual pre-tax cost synergies of approximately $150 million by the third year.

“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,” said Dennis Muilenburg Boeing Chairman, President and Chief Executive Officer.

Embraer Chief Executive Officer and President Paulo Cesar de Souza e Silva added that 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 statement gave no indication of any payment Boeing was making under the deal.

The statement said that financial and operational details were still being finalised, 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.

In addition, both companies will create another joint venture to promote and develop new markets and applications for defense products and services, especially the KC-390 multi-mission aircraft, based on jointly-identified opportunities, they said.

Close of transaction

The transaction is expected to close by the end of 2019.

Embraer, the third largest aircraft manufacturer in the world, was founded as a state group in 1969 before being privatised in 1994, although the Brazilian government retained the right to make strategic decisions for the company.

Shares in Brazilian aircraft maker Embraer crashed seven percent on the Sao Paulo stock market on Thursday, following the announcement of an agreement with US giant Boeing.

Agencies
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