The company has scheduled for February 26 shareholders’ meeting to approve the agreement. Embraer will have 51% and Boeing 49% of the capital in the joint venture for the KC-390.
On Thursday night, after announcing the signing of the operating agreement with Boeing, Embraer presented the proposed partnership to its shareholders, who are called to debate it in the assembly on February 26. The document also details how the joint venture in the defense area will be for the KC-390 military jet, with Embraer 51% of the new company and Boeing 41%.
The scope of activities will include final assembly work, sales and aftermarket services for the KC-390, except in connection with, inter alia, “work related to activities that are subject to facility authorization or other (FOCI), and (ii) orders and requests for use by the Brazilian Air Force – FAB and two other contracts under negotiation. “
As for the financial structure, he says that Boeing and Embraer will make contributions to the New KC-390 Society in cash and assets and that reductions in taxes that will be due will be shared equally.
The Board of Directors of this new company for the KC-390 will be composed of five members, four of whom will be nominated by Embraer, one of whom will be designated by the Brazilian Air Force. Boeing will have the right to nominate a board member and chief financial officer. The CEO will be appointed by Embraer.
According to the terms of the agreement, in order to align the interests of the parties, the Amended and Restated Limited Liability Company Agreement of New KC-390 states “that no member may sell, transfer or encumber any participation in the New KC-390 its own ultimate parent company or any subsidiary of such parent company” and that, at any time after the 10th anniversary of its signature, Boeing may elect to transfer all“ and not less than the entirety “of its participation in the New Company KC-390 for the Embraer Company for a total value of US $ 1.00.
Under the contract signed yesterday between the parties, Embraer will have 20% of the new association for commercial aviation and 51% in the JV for the KC-390 and will maintain all executive aviation and defense and security activities, as explained in the proposal to the shareholders. As previously disclosed, the net result of the operation will be approximately US$ 3 billion for Embraer, considering that the value of the business in commercial aviation is US$ 5.26 billion, which includes the subscription of new shares by Boeing Brasil and the acquisition of shares directly from Embraer, for approximately US$ 4.2 billion – subject to adjustments in terms of net debt and working capital on the closing date of the operation.
Embraer points out that “it is not possible to guarantee that the transaction, if approved by the shareholders, will, in fact, be completed, nor will it predict the term within which it will be completed“, but that management expects it to be completed by the end of 2019. One of the conditions is that the new company in commercial aviation will assume liabilities of Embraer and its subsidiaries as of the closing, and can not have indebtedness over US$ 4.5 billion.
By the end, Embraer‘s cash position will be “significantly superior“ to indebtedness, management expects an extraordinary dividend distribution of approximately US$ 1.6 billion.
The document reiterates that the rights arising from the ordinary share of the special class, the golden share, are retained and recalls that on January 10, the Federal Government stated that it did not intend to exercise its right of veto over the operation, since it did not affects either the national interests or the sovereignty of the Brazilian State.