Boeing, Embraer To Establish JV; Boeing To Hold 80% Ownership Stake

(RTTNews) - Boeing (BA) and Embraer (ERJ) announced a Memorandum of Understanding to establish a strategic partnership, and which proposes the formation of a joint venture comprising the commercial aircraft and services business of Embraer that would strategically align with Boeing's commercial development, production, marketing and lifecycle services operations. Boeing will hold an 80 percent ownership stake in the joint venture and Embraer will own the remaining 20 percent stake. The transaction values 100 percent of Embraer's commercial aircraft operations at $4.75 billion, and contemplates a value of $3.8 billion for Boeing's 80 percent ownership stake in the joint venture.

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 year three.

The joint venture will become one of Boeing's centers of excellence for end-to-end design, manufacturing, and support of commercial passenger aircraft, and will be fully integrated into Boeing's broader production and supply chain. The joint venture will be led by Brazil-based management, including a President and Chief Executive Officer. Boeing will have operational and management control of the new company.