Boeing and Embraer announced on Thursday that they will create a new company that will be responsible for the Brazilian company’s regional aircraft line – especially the new E2 family with the E170-E2, E190-E2 and E195-E2 models. The deal, which was expected months ago, will now be detailed by the two manufacturers and presented to the Brazilian government that has the right to veto the agreement.
In the new company, Boeing and Embraer will be partners with 80% of the first company and 20% of the second. By the line of jets, the American company intends to pay $ 3.8 billion – Embraer as a whole is worth in the market US $ 4.75 billion.
Boeing’s intention was to buy 100% of Embraer, which includes the corporate jet line and the defense division. In this case, the company’s proposal is to form a second joint venture to sell the military aircraft of the Brazilian manufacturer, specifically the KC-390 freighter, currently under development.
The announcement of the Memorandum of Understanding foresees three to four months to align all aspects of the business. It will then be presented to the Brazilian government that will approve the agreement or not. The expectation is that the new company should only emerge within at least a year.
Competition
The agreement between Boeing and Embraer was a natural step for both companies after Airbus took over the Bombardier CS Series line of commercial jets last year. The attitude of the European company precipitated the negotiation between the American manufacturer and the Brazilian company that have a profile similar to that of Airbus and Bombardier – while Boeing sells aircraft above 150 seats Embraer specializes in the market of 70 to 130 seats.
The two groups are expected to strengthen in the dispute over commercial jet orders worldwide and create a huge barrier for new manufacturers seeking to enter such a market as Russia’s Sukhoi, Japan’s Mitsubishi and China’s COMAC.
For Embraer, which is a public company, the news was received by the market with pessimism. The shares were reportedly down because of worries about the drop in investments and job losses in Brazil where their plants are.
Boeing and Embraer will need to rush to close the deal as there will be presidential elections in Brazil in October and many candidates are against the deal. If the agreement takes too long to be signed, it may be canceled by the next Brazilian president.
