Boeing, Embraer approve partnership terms

The $4.2 billion ownership investment by Boeing will be led by Brazil-based management, and Boeing will have operational and management control of the new company, a joint news release noted.

The aerospace companies have more than two decades of collaboration and “the respect we have for each other and the value we see in this partnership has only increased since we announced our joint efforts earlier this year,” said Dennis Muilenburg, Boeing chairman, president, and CEO.

The synergy with Embraer and it’s slightly smaller 76- to 130-seat E-jets, as compared to the 172- to 230-seat Boeing 737 MAX line, could help the Seattle manufacturer counter rival Airbus and its Bombardier regional jet partner in the commercial aviation marketplace, The Seattle Times reported.

The two companies also agreed to a joint venture to “promote and develop new markets” for the “multi-mission medium airlift KC–390” twin-engine transport jet aircraft. Embraer will own a 51-percent stake in the joint venture to Boeing’s 49 percent. The high-wing KC–390 is seen as competition to Lockheed Martin’s C–130 Hercules workhorse.

The partnership “is expected to be neutral” to Boeing’s per-share earnings in 2020 “and accretive thereafter,” the news release noted, with annual pre-tax cost synergies of approximately $150 million “anticipated by the third year of operations.” Embraer retains rights for certain strategic decisions, which could include transfer of operations from Brazil.

If Embraer’s board of directors signs off and the partnership terms clear shareholder and regulatory approvals, the transaction should close “by the end of 2019.”