Home Aviation Embraer and Boeing Approve the Merger and Await Government Endorsement

Embraer and Boeing Approve the Merger and Await Government Endorsement

Subsequently, the merger will be submitted for the approval of shareholders and regulatory authorities

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The Embraer announced on Monday, Dec. 17 that its board of directors approved a strategic partnership for combining active in commercial aviation area with Boeing.

The Brazilian aircraft manufacturer points out in a relevant fact sent to the Brazilian Securities and Exchange Commission (CVM) that the partnership is still subject to approval by the Brazilian government and will subsequently be submitted to the approval of shareholders and regulatory authorities.

The council has also authorized the sending of a notice requesting the prior approval of the Union.

Under the proposed partnership, Boeing will hold an 80 percent stake in the joint venture for US $ 4.2 billion (R $ 16.4 billion). In July, when the agreement was announced, the amount reported for payment to Embraer by Boeing was $ 3.8 billion.

The joint venture was valued at $ 4.75 billion at the time. Now, the value announced by the company in relevant fact is US $ 5.26 billion (R $ 20.6 billion). According to Embraer calculations, the result of the operation, net of separation costs, will be US $ 3 billion (R $ 11.7 billion).

According to the company, the expectation is that the partnership will have no impact on Boeing’s earnings per share in 2020, having a positive impact in the following years. The joint venture is expected to generate annual synergies of about $ 150 million (R $ 586.5 million) – before taxes – by the third year of operation.

After the transaction is completed, the commercial aviation joint venture will be led by a team of executives based in Brazil, including a president and CEO.

Boeing will have operational and management control of the new company, which will respond directly to Dennis Muilenburg, President, and CEO of Boeing. Embraer will have decision-making power for some strategic issues, such as the transfer of Brazilian operations.

In the statement, Paulo Cesar de Souza e Silva, president, and CEO of Embraer says that the company is confident that this partnership will be of great value for Brazil and for the Brazilian aerospace industry as a whole.

KC-390
The companies also reached an agreement for a second joint venture to promote and develop new markets for the KC-390 multimission aircraft. Under the proposed partnership, Embraer will hold a 51 percent stake in the joint venture and Boeing, the remaining 49 percent.

The transaction is also subject to approval by the Brazilian government, ratification by the board of directors of Embraer and authorization of Embraer to sign the definitive documents of the transaction.

Subsequently, the strategic partnership must still be submitted for approval by shareholders, regulatory authorities, and other conditions relevant to the conclusion of such a transaction. If approvals occur in the expected time, Embraer expects that the negotiation will be completed by the end of 2019.