In a new Boeing-Embraer joint venture, Boeing is buying control of Embraer’s commercial jet unit. According to the deal, Embraer’s commercial jet unit, i.e., its commercial aircraft operations, is worth $4.85 billion. In this Boeing-Embraer deal, Boeing is paying $3.8 billion for an eighty percent controlling stake. In other words, Boeing will have a controlling interest.
The idea of a Boeing-Embraer joint venture began two years ago. Specifically, the idea included Boeing either purchasing Embraer’s commercial aircraft operations or acquiring a controlling stake.
A joint venture is a partnership comprising at least two parties. The parties contribute capital and assets. Joint ventures may involve companies, governments, and even individual people.
Embraer is a Brazilian aerospace conglomerate with headquarters in São José dos Campos, São Paulo, Brazil. The company produces military, executive, commercial, and agricultural aircraft. It also provides aeronautical services.
Embraer is the world’s third largest civil aircraft producer, after Airbus in Europe and Boeing in the United States.
Boeing-Embraer joint venture
In a press release, Boeing says the two companies have signed a Memorandum of Understanding. The document establishes a strategic partnership that positions the two companies. They aim to accelerate growth not only in their domestic aerospace markets but also globally.
According to the non-binding agreement, the two companies propose to form a joint venture. The joint venture will comprise Embraer’s commercial jet unit and Boeing’s commercial development, production, marketing, and lifecycle services operations.
The agreement states that Boeing will hold an 80% stake in the joint venture. Embraer will hold a 20% stake. In other words, Boeing and Embraer will have majority and minority interests respectively.
Dennis Muilenburg, Boeing’s Chairman, President, and CEO, said:
“By forging this strategic partnership, we will be ideally positioned to generate significant value for both companies’ customers, employees, and shareholders – and for Brazil and the United States.”
“This important partnership clearly aligns with Boeing’s long-term strategy of investing in organic growth and returning value to shareholders, complemented by strategic arrangements that enhance and accelerate our growth plans.”
Paulo Cesar de Souza e Silva, Embraer CEO and President, said:
“The agreement with Boeing will create the most important strategic partnership in the aerospace industry, strengthening both companies’ leadership in the global market.”
“The business combination with Boeing is expected to create a virtuous cycle for the Brazilian aerospace industry, increasing its sales potential, production, creating jobs and income, investments and exports, and in doing so, adding more value to customers, shareholders and employees.”
CEO stands for Chief Executive Officer. The CEO is the most senior corporate officer or administrator in a company. The person is in charge of managing for-profit and non-profit organizations.
The Boeing Company
The Boeing Company has its headquarters in Chicago, Illinois, United States. The company manufactures and sells rockets, satellites, launch systems, aircraft, and communication systems.
It also makes and sells electronic and defense systems. It is the world’s second-largest defense and aerospace contractor.