Embraer Shareholders Approve JVs with Boeing
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Embraer Shareholders Approve JVs with Boeing

By IndraStra Global News Team

Embraer Shareholders Approve JVs with Boeing

On February 26, 2019, during an extraordinary meeting held at the Brazilian aircraft maker Embraer's headquarters in São Jose dos Campos, Embraer's shareholders cleared the way for a partnership between Embraer and Boeing by giving 96.8 percent of approval votes. Shareholders voted in favor of the deal after Embraer overturned an injunction that had put the shareholder meeting on hold. 

The proposal sets forth a joint venture including operations with Embraer commercial aircraft division. All of the company’s operations with commercial planes was estimated at US$ 5.26 billion, Embraer reported. The transaction is said to encompass US$ 4.2 billion for Boeing’s 80 percent share in the new enterprise. The transaction must now be approved by antitrust regulators around the world. Once the approval is received, both the companies hoping to close the deal by year-end.

A joint statement announcing the deal indicated that Boeing would take full operational and management control of the new company, but that a Brazil-based management team, including a president and CEO, will lead the joint venture and report to Boeing CEO Dennis Muilenburg. Under the terms of the new deal, Boeing will control 80 percent of the resulting company, and Embraer 20 percent.

Embraer shareholders also backed the creation of another joint venture to promote and develop new markets for military multimission plane KC-390. In this new venture, Embraer will hold 51 percent and Boeing 49 percent. 

Embraer will continue to operate its commercial aviation division as well as KC-390 independently until the transaction is concluded.

Image Attribute: Embraer KC-390, PT-ZNJ - Desfile Cívico 2018 / Source: Marcos Corrêa/PR / Wikipedia

Image Attribute: Embraer KC-390, PT-ZNJ - Desfile Cívico 2018 / Source: Marcos Corrêa/PR / Wikipedia

Last December, the two companies announced they had approved the terms for the two joint ventures and the Brazilian government backed the move in January. Next, Embraer’s board ratified its support and the definitive documents were signed. 

“This important partnership will prepare the two companies to offer a proposal with a more robust value to our clients and investors, in addition to creating more opportunities for our employees. Our deal will bring mutual benefits and increase the competitiveness of both Embraer and Boeing,” said Embraer CEO Paulo Cesar de Souza e Silva.

The Brazilian firm released a note stating that defense and executive jet business, as well as association service operations, will remain a separate, publicly traded company. “A series of deals focusing on the supply chain, engineering and facilities will ensure mutual benefits and more competitiveness between Boeing, the joint venture, and Embraer,” the note reads.

"Approval by Embraer's shareholders is an important step forward as we make progress on bringing together our two great aerospace companies. This strategic global partnership will build on Boeing's and Embraer's long history of collaboration, benefit our customers and accelerate our future growth," said Dennis Muilenburg, Boeing chairman, president, and chief executive officer.

"People across Boeing and Embraer share a passion for innovation, a commitment to excellence, and a deep sense of pride in their products and their teams – these joint ventures will strengthen those attributes as we build an exciting future together," said Greg Smith, Boeing Chief Financial Officer and Executive Vice President of Enterprise Performance & Strategy.

Last July,  Airbus bought the majority stake in C Series Aircraft Limited Partnership - 50.01%, while Bombardier and Investissement Québec own approximately 34% and 16% respectively.  Now, the upcoming JV between Embraer and Boeing will compete directly with Airbus in the 100-150 seat market segment at the global level. But critics say this new arrangement will leave Embraer weaker and financially dependent on its two remaining divisions, executive jets and defense, both of which have posted losses in recent quarters.

With reporting by Empresa Brasil de Comunicação, and Reuters