Boeing, Embraer forge on with tie-up after Brazil suspension reversed

SAO PAULO: US planemaker Boeing and Brazil’s Embraer said they have approved the terms of a partnership to create a joint venture now worth US$5.26 billion – more than when they first announced it in July.

“The transaction remains subject to approval by the Government of Brazil, after which Embraer and Boeing intend to execute definitive transaction documents,” the two companies said in a statement.

The news comes a week after a Brazil appeals court overturned a ‘hasty’ suspension ordered by a lower court days earlier that would have prevented the outgoing Brazilian government of taking any concrete decision of the proposed tie-up.

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 retains a “golden share” giving it the right to veto strategic decisions for the company.

Under the planned deal, Boeing is to take an 80 per cent stake in Embraer’s commercial business, thus allowing it to offer planes with capacity of up to 150 seats – a market in which Boeing currently does not compete.

Embraer’s military aircraft business was excluded to overcome Brazilian government opposition to giving up a national champion to a foreign entity.

The deal initially valued the joint venture at US$4.75 million.

But Monday’s statement said Boeing’s 80-per cent stake would be worth US$4.2 billion, making the whole of the merged operation worth nearly US$5.3 billion.