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Embraer, Boeing agree to terms of tie-up


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Embraer, Boeing agree to terms of tie-up

Boeing Co. and Embraer SA have agreed to the terms of a joint venture in which the U.S.-based group will acquire an 80% stake in the Brazilian plane maker's commercial aircraft and services operations.

The deal now values the division at $5.26 billion compared with $4.75 billion in July. Embraer expects to generate approximately $3 billion from the transaction, after separation costs.

Under the terms of the deal, Boeing will own an 80% stake in the new company formed following the acquisition for an estimated $4.2 billion.

The new company will be led by Brazil-based executives and will report directly to Boeing Chairman, President and CEO Dennis Muilenburg.

Boeing will control the new company's operations and management, while Embraer will keep its consent rights for certain strategic decisions, according to a statement.

The venture is expected to be neutral to Boeing's EPS in 2020, and accretive in succeeding years. It is projected to generate annual pretax cost synergies of about $150 million by the third year of operations.

The deal is subject to approval by Brazilian authorities, shareholders and other regulators, as well as customary closing conditions.

Boeing and Embraer also announced another joint venture to market Embraer's KC-390 aircraft. Under the deal, Embraer will own a 51% stake in the tie-up, while Boeing will get the remaining 49%. The deal is subject to regulatory approvals and other customary closing conditions and is expected to close by the end of 2019.