Boeing-Embraer joint venture

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An Embraer E-Jet E190 below a Boeing 777F

On July 5, 2018, Boeing and Embraer announced a joint venture for Embraer's airliners, after Airbus acquired a majority of the competing Bombardier CSeries on October 16, 2017.


In December 2017, the Wall Street Journal reported Boeing has been in takeover talks with the 18,000 employee strong Embraer, valuing it over its $3.7 billion market value, awaiting Brazilian government approbation.[1] The two companies confirmed that a potential combination was being discussed, with a transaction subject to approval by the Brazilian government and regulators, the two companies’ boards and shareholders[2] The potential deal is seen as a reaction to the Airbus-Bombardier deal on the CSeries.[3]

On December 22, 2017, Brazilian President Michel Temer said the sale of Embraer to Boeing was "out of the question", adding that the government is in favor of partnerships with the company, but warning that it will veto changes in stock control.[4] On December 28, defense minister Raul Jungmann opposed transferring control of Embraer SA as its the defense business cannot be separated from its commercial operations, but would welcome a deal maintaining local control of the company.[5] On January 2, 2018, Brazilian newspaper Valor Econômico reported that forming joint ventures, sharing costs and income in definite areas, was preferable to avoid changing control of Embraer.[6]

Embraer’s engineers could work on Boeing’s future developments, the New Midsize Airplane (NMA) or a New Small Airplane, but it wants to control at least Embraer's airliners to avoid repeating the B787 debacle: it partnered with major subcontractors and handed them engineering work, but those weren’t up to the task, resulting in unprecedented delays, overruns of billions of dollars and Boeing was forced to buy out some.[7]

July 2018 Memorandum of Understanding

On July 5, 2018, a Memorandum of Understanding was announced for a strategic partnership: for $3.8 billion Boeing will hold 80% of a joint venture for Embraers's airliners and services, valued at $4.75 billion, and Embraer will own the remaining 20%. It should generate $150 million synergies by year three and add to Boeing's earnings per share from 2020. Boeing will control the new company, managed from Brazil and reporting to Dennis Muilenburg, another defense joint venture will market the KC-390. After negotiation of definitive details, shareholder and regulatory approval is expected by the end of 2019.[8]

The July 5 memorandum leaked in October, the deadline to finalise the transaction is set for December 5, for a closure by the end of 2019. Embraer would receive payments for five years before the joint venture would distribute 50% of its profits to shareholders. A lock-up agreement would prevent Embraer or Boeing from selling their shares for 10 years. A put option would protect the minority stake value, allowing Embraer to sell its shares at the same price, inflation adjusted. The new company scope include the designs, manufacturing, certification and sales of the ERJs, E-Jets and E-Jets E2. Embraer will retain its executive business jet and its defence business, but a joint venture for the KC-390 freighter will be explored.[9]

On 6 December, at the demand of four congressmen ot the left-wing Brazilian Workers Party, a Brazilian federal court forbids the regional plane-maker's board of directors to form the joint venture, as that would give away for free the profitable airliner division and would remove it from the Brazilian Government control. The government can veto the joint venture and is reluctant to allow it, but president-elect Jair Bolsonaro, which takes office on the first of January, is favorable to the deal.[10] Leeham News observes Boeing needs Embraer but Embraer also needs Boeing as the E2 is selling slowly, in part due to the joint venture wait, and the E175-E2 was sold only to SkyWest but is too heavy for US scope clauses.[11] The following week, the injunction was overturned by a panel of appeals court.[12]

On 17 December, a strategic partnership was announced, subject to Brazilian Government approval, before the definitive transaction subjected to shareholder and regulatory approval. To market the KC-390, another joint venture will be owned for 51% by Embraer and 49% by Boeing, and will also need similar authorizations.[13] Boeing will pay $4.2 billion for its 80% stake in the JV, up from $3.8 billion, valuing it $5.25 billion up from $4.75 billion when it was proposed on July 5.[14]

On 20 December, in response to Embraer’s union class action, the same Judge Victor Giuizo Neto blocked again the proposed sale as “The brutal asymmetry in the shareholder structure of this venture prevents it from being carried out without compromising the survival of national interests”, an injunction contested by Embraer.[15] On 22 December, the injunction was overturned, allowing the proposed sale to proceed.[16] Federal Court President Therezinha Cazerta said it was outside the court’s purview.[17] On 10 January 2019, the new Brazilian government approved the tie-up as it would "maintain the current jobs in Brazil," while no commitment was made before.[18]


  1. ^ Dana Mattioli, Dana Cimilluca and Liz Hoffman (Dec 21, 2017). "Boeing Held Takeover Talks With Brazilian Aircraft Maker Embraer". Wall Street Journal.
  2. ^ "Boeing and Embraer Confirm Discussions on Potential Combination" (Press release). December 21, 2017. Boeing and Embraer
  3. ^ "Boeing Is in Talks for Combination With Regional-Jet Maker Embraer". December 21, 2017. Retrieved December 22, 2017.
  4. ^ Letícia Fernandes e Manoel Ventura (Dec 22, 2017). "Capital estrangeiro na Embraer é 'muito bem-vindo', diz Temer". O Globo Journal (in Portuguese).
  5. ^ "Brazil defense ministry opposes giving up Embraer control to Boeing". Reuters. Dec 28, 2017.
  6. ^ "Boeing talks not considering change of control at Embraer: paper". Reuters. Jan 2, 2018.
  7. ^ Dominic Gates (January 11, 2018). "Boeing's bid to buy Embraer could see Brazilian engineers work on the 797". The Seattle Times.
  8. ^ Boeing, Embraer (July 5, 2018). "Boeing and Embraer to Establish Strategic Aerospace Partnership to Accelerate Global Aerospace Growth" (Press release).
  9. ^ Jon Hemmerdinger (11 Oct 2018). "Embraer-Boeing agreement lays out terms of proposed joint venture". Flightglobal.
  10. ^ Ricardo Brito, Marcelo Rochabrun (6 Dec 2018). "Embraer-Boeing aviation deal blocked by Brazilian court". Reuters.
  11. ^ "Boeing deal, "crucial to Embraer survival," in doubt". Leeham News. Dec 6, 2018.
  12. ^ Ghim Lay Yeo (10 Dec 2018). "Brazil court overturns injunction against Boeing-Embraer deal". Flightglobal.
  13. ^ Boeing and Embraer (Dec 17, 2018). "Embraer and Boeing Approved the Terms of Strategic Aerospace Partnership, Seek Brazilian Government Approval" (Press release).
  14. ^ Jerry Siebenmark (December 17, 2018). "Boeing, Embraer Agree To Terms on Commercial JV, Propose Second JV for KC-390". AIN online.
  15. ^ "Brazil judge again blocks Boeing-Embraer tie-up as deal nears close". Reuters. 20 Dec 2018.
  16. ^ "Brazil judge overturns injunction that blocked Embraer-Boeing deal". Reuters. 22 December 2018.
  17. ^ "Brazilian justice allows Boeing-Embraer venture to proceed". Associated Press. 22 December 2018.
  18. ^ Marcelo Rochabrun, Maria Carolina Marcello (10 January 2019). "Brazil approves Boeing-Embraer tie-up with new commitment to keep local jobs". Reuters.

Further reading

  • Ghim Lay Yeo (5 July 2018). "Embraer aims for Brazil approval of JV by early November". Flightglobal.
  • Stephen Trimble (5 July 2018). "Boeing, Embraer form separate joint venture to boost KC-390". Flightglobal.
  • Julie Johnsson and Fabiola Moura (5 July 2018). "Boeing Revs Up Airbus Challenge on $4.75 Billion Embraer Venture". Bloomberg.
  • Ernest S. Arvai (July 5, 2018). "Boeing and Embraer: What it Means". AirInsight.
  • Dominic Gates (5 July 2018). "Boeing's Embraer deal is a key strategic play for the future". Seattle Times.
  • Jens Flottau and Guy Norris (Jul 20, 2018). "Boeing And Embraer Plan Holistic Partnership". Aviation Week & Space Technology.
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