Boeing Co is to take control of the commercial business of Brazil’s Embraer SA, the companies announced on Thursday, better positioning the US aerospace giant to compete with rival Airbus SE in the market for smaller jets.
The announcement follows months of talks to allay concerns of the Brazilian government, which had veto power over the transaction and initially resisted ceding control to the US company.
Under the terms of the deal, Boeing is to hold an 80 percent stake in the commercial part of Embraer, which is valued at US$4.75 billion, the companies said.
The deal would allow Boeing to offer planes with capacity up to 150 seats, a market that it does not currently compete in.
It follows a similar strategic partnership by European archrival Airbus with Canada’s Bombardier Inc in October last year.
The US firm is to have operational and management control over the new venture, which is to be led by a Brazil-based head who would report to Boeing chief executive Dennis Muilenburg, the statement said.
The companies are creating another joint venture to promote their defense products and services, especially Embraer’s KC 390, a military transport aircraft.
Embraer CEO and president Paulo Cesar de Souza e Silva said that the tie-up would create a “virtuous cycle” for Brazilian aerospace, increasing sales potential and production, and consequently adding value for shareholders and employees.
The companies said that financial and operational details were still being finalized, a process which would continue over several months, after which the deal would be subject to shareholder and regulatory approval, including by the Brazilian government.
Brazilian officials initially opposed giving up control of Embraer to a foreign entity. However, the parties appear to have gotten around this concern by limiting Boeing’s control to the civilian part of the business.
Embraer, the third-largest aircraft manufacturer in the world, was founded as a state group in 1969 before being privatized in 1994, although the Brazilian government retained the right to make strategic decisions for the company.
Boeing executives have for months expressed interest in the deal, while making clear that they did not view it as a must-do transaction.
Muilenburg told a financial conference in late May that the Brazilian company’s assets included strong engineering talent and new opportunities in the airplane services business.
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