Brazil’s government consented to allow Embraer S.A. to sell its commercial aircraft division to a new joint-venture with The Boeing Co., in development for the past year and formally defined in December. The venture will be 80% controlled by Boeing and 20% by Embraer, which has been the basis for much opposition to the deal in Brazil.
Embraer is a private company in which the government holds "golden shares," meaning it has veto authority over any change in ownership. The sale of the group’s Commercial Aviation division to the new venture for $4.2 billion will retain the Defense & Security and Executive Jets divisions in the existing ownership.
Boeing and Embraer issued a joint statement noting that their "strategic partnership … will position both companies to accelerate growth in global aerospace markets."
In its statement, the government noted that the new venture will preserve current employment in Brazil, acknowledging the controversy that has surrounded the sale in that country. Boeing and Embraer offered no details on that point.
Two separate efforts by leftist and Labor Party figures during December to block the government considering the sale were overturned by courts. Those efforts may continue as the boards of Boeing and Embraer ratify the final transaction. Then, the closing of the transaction will be subject to shareholder and regulatory approvals and customary closing conditions. In their statement, the two firms anticipated the transaction closing by the end of 2019.
The partnership will produce aircraft for the commercial aircraft “mid-market,” meaning for 70-150 passengers. This would include the Embraer E-Series and newer E-Jet E2 twin-engine narrow-body jets.
Strategically, for Boeing, adding the Embraer business would counter rival Airbus’ consolidation of the Bombardier C-Series medium-range product line.
Boeing and Embraer also agreed to the terms of another joint venture to promote and develop new markets for the KC-390 multi-mission medium airlift helicopter. Embraer would own a 51% stake in this joint venture, and Boeing would hold 49%.