Boeing and Brazilian planemaker Embraer announced on Thursday that they have agreed to create a new joint venture.
The new JV will consist of Embraer’s commercial aircraft and services division along with Boeing commercial development, production, as well as marketing and lifecycle services operations.
Boeing’s 80% share of the JV is valued at $3.8 billion. Embraer will retain the remaining 20% of the JV which values its entire commercial aircraft business at $4.75 billion.
The deal is expected to close by the end of 2019. Boeing and Embraer are joining forces. The US aviation giant and the Brazillian planemaker announced on Thursday a preliminary agreement to establish a joint venture.
The new joint venture will consist of Embraer’s commercial aircraft and services divisions along with Boeing’s commercial development, production, as well as marketing and lifecycle services operations.
“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,” Boeing CEO Dennis Muilenburg said in a statement. “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.”
Boeing will hold an 80% stake in the new JV while Embraer, long-considered a shining beacon of Brazilian industrial might, will retain the remaining 20%. The deal values Embraer’s commercial aircraft business at $4.75 billion with Boeing’s stake in the JV valued at $3.8 billion, the parties said in a statement.
The proposed deal is expected to close by the end of 2019. According to Boeing, the JV is projected to deliver $150 million in annual pre-tax cost saving by its third year.
With the Embraer JV in place, Boeing can now offer a portfolio of commercial aircraft ranging from 70-seat Embraer regional jets to its next-generation 500-seat 777X widebody.
The deal’s announcement comes days after rival Airbus completed its 50.01% take of Canadian aircraft maker- Bombardier’s critically acclaimed C-Series program. The JV now gives Boeing’s sales team a direct rival to the 100-seat C Series in the form of the brand-new Embraer E190-E2.
Over the past decade, both Boeing and Airbus abandoned the 100-seat airliner market — instead, deciding to focus on larger, more lucrative jets. This allowed traditional regional jet makers like Bombardier and Embraer to not only thrive but move into the segment vacated by the all-powerful duo.
