Boeing Forms $4.75 Billion Commercial Jet Venture With Embraer

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Boeing Inc (NYSE: BA)


Boeing has entered into a non-binding agreement with Brazil’s Embraer, in a move that will see the American aircraft maker take a majority stake of 80% worth $3.8 billion.

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Embraer Inc. will own the remaining 20% of the venture and maintain control of its military programmes in Brazil.

The deal between the two companies marks another major milestone in the reshaping of the aerospace industry.

The company had been going after Embraer for quite long seeking to counter its European rival, Airbus, which recently acquired a majority stake in Canada’s Bombardier C-series program. Airbus-Bombardier partnership had threatened to deprive Boeing a significant position of the global market.

Analysts say that Boeing-Embraer deal represents the biggest rearrangement in the international aerospace industry in decades, and is expected to strengthen them against newcomers from Japan, China, and Russia.

Aerospace companies in Asia are working hard to roll out new wide-body and single-aisle airplanes.

The alliance adds a 70-to-130 seat family to the lineup of Boeing, and is expected to raise the company’s per-share earnings from 2020.

The companies also added that the venture will generate $150 million annual pre-tax cost savings by the third year.

Brazilian officials had raised concerns over the interference of its military programs by the US. The government of Brazil has held a strategic role at Embraer since it went private, but it now appears satisfied with the deal.

The transaction, which is still subject to customary closing conditions, is expected to close by the end of 2019.

$BA stock was little changed on Thursday, finishing regular trading session with a gain of $0.46, or 0.14% to trade at $333.18.

Meanwhile in Sao Paulo, Brazil, news of the deal caused Embraer stock to lose more than 10%.

Some investors saw Embraer’s stake in the venture as significantly lower as opposed to what they had anticipated.

Boeing Company Profile

The Boeing Co. is an American aerospace company that is involved in the manufacture of commercial airplanes, as well as space, security, and defense systems.

The company’s segments of operation are as follows; Defense, Space and Security; Commercial Airplanes; Boeing Capital and; Global Services.

The Commercial Airplanes division engages in the development, production, and marketing of commercial jet airliners.

This segments also offers fleet support services, mainly to the commercial airline sector internationally.

The Defense, Space and Security category researches, develops, produces and modifies unmanned and manned military weapons; and aircraft systems for worldwide strike, including global mobility, including tilt-rotor aircraft, tanker, and rotorcraft; and combat and fighter missile systems and rotorcraft aircraft.  

The segment also offers airborne reconnaissance and surveillance, including control and command, airborne anti-submarine aircraft and battle management.

The Boeing Capital division seeks to make sure that customers of the company have the financing they require to buy their Boeing products. It is also take care of overall financing exposure.

The Global Services division offers services to defense and commercial customers. The Boeing Company was founded in 1916 by William Edward Boeing. Its headquarters are located in Chicago, Illinois. –Reuters