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| Embraer |
The
Brazilian government today approved the creation of a joint venture that would
give Boeing control over Embraer’s commercial airplane operation.
That
approval is crucial to the $4.2 billion deal, because the government holds a
“golden share” in Embraer that could have been used to veto the arrangement.
Some observers wondered whether the country’s newly inaugurated president, Jair
Bolsonaro, would give the OK.
Today
the government said that the agreement “preserves
sovereignty and national interests,” and that the “golden share would not
be exercised.”
The
arrangement calls for Boeing to acquire an 80 percent ownership stake in a
joint venture that would take in Embraer’s commercial aircraft and services
operations.
The joint
venture would be led by Brazil-based management, including its own
president and CEO. Boeing would have operational and management control of the
new company, which would report directly to Boeing CEO Dennis Muilenburg.
Embraer would retain consent rights for some decisions, such as transfer of
operations from Brazil.
A
separate joint venture, 51 percent owned by Embraer, would promote and develop
new markets for the Brazilian company’s KC-390 military transport plane.
In
a joint statement,
Boeing and Embraer said they “welcomed approval by the government of Brazil of
the strategic partnership that will position both companies to accelerate
growth in global aerospace markets.”
The
Boeing-Embraer partnership counters a deal between
Boeing’s European archrival, Airbus, and Canada’s Bombardier. Both
Embraer and Bombardier focus on the lower end of the commercial airplane
market, and the two international teams are likely to compete fiercely in the
years ahead.
Boeing
and Embraer are due to execute definitive transaction documents once the
Brazilian company’s board of directors ratifies its prior approval. The
closing of the transaction is still subject to shareholder and regulatory
approvals and customary closing conditions. If all goes as planned, the
transaction could close by the end of 2019. However, the deal could be subject
to legal challenges from Brazilian labor unions, politicians and minority
shareholders.
Source: www.geekwire.com
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