CHICAGO and SAO PAULO,
July 5, 2018 /PRNewswire/ -- Boeing
(NYSE: BA) and Embraer (B3: EMBR3, NYSE: ERJ) announced they have
signed a Memorandum of Understanding to establish a strategic
partnership that positions both companies to accelerate growth in
global aerospace markets.
The non-binding agreement proposes the formation of a joint
venture comprising the commercial aircraft and services business of
Embraer that would strategically align with Boeing's commercial
development, production, marketing and lifecycle services
operations. Under the terms of the agreement, Boeing will hold an
80 percent ownership stake in the joint venture and Embraer will
own the remaining 20 percent stake.
"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," said Dennis
Muilenburg, Boeing's Chairman, President and Chief Executive
Officer. "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," Muilenburg said.
"The agreement with Boeing will create the most important
strategic partnership in the aerospace industry, strengthening both
companies' leadership in the global market," said Paulo Cesar de Souza e Silva, Embraer Chief
Executive Officer and President. "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."
The transaction values 100 percent of Embraer's commercial
aircraft operations at $4.75 billion,
and contemplates a value of $3.8
billion for Boeing's 80 percent ownership stake in the joint
venture. The proposed partnership is expected to be accretive to
Boeing's earnings per share beginning in 2020 and to generate
estimated annual pre-tax cost synergies of approximately
$150 million by year three.
The strategic partnership will bring together more than 150
years of combined leadership in aerospace and leverage the two
companies' highly complementary commercial product lines. The
partnership is a natural evolution of a long-standing history of
collaboration between Boeing and Embraer over more than 20
years.
On finalization, the commercial aviation joint venture will be
led by Brazil-based management,
including a President and Chief Executive Officer. Boeing will have
operational and management control of the new company, which will
report directly to Muilenburg.
The joint venture will become one of Boeing's centers of
excellence for end-to-end design, manufacturing, and support of
commercial passenger aircraft, and will be fully integrated into
Boeing's broader production and supply chain.
Boeing and the joint venture would be positioned to offer a
comprehensive, highly complementary commercial airplane portfolio
that ranges from 70 seats to more than 450 seats and freighters,
offering best-in-class products and services to better serve the
global customer base.
In addition, both companies will create another joint venture to
promote and develop new markets and applications for defense
products and services, especially the KC-390 multi-mission
aircraft, based on jointly-identified opportunities.
"Joint investments in the global marketing of the KC-390, as
well as a series of specific agreements in the fields of
engineering, research and development and the supply chain, will
enhance mutual benefits and further enhance the competitiveness of
Boeing and Embraer," said Nelson
Salgado, Embraer's Executive Vice President, Financial and
Investor Relations.
Finalization of the financial and operational details of the
strategic partnership and negotiation of definitive transaction
agreements are expected to continue in the coming months. Upon
execution of these agreements, the transaction would then be
subject to shareholder and regulatory approvals, including approval
from the Government of Brazil, as
well as other customary closing conditions. Assuming the approvals
are received in a timely manner, the transaction is expected to
close by the end of 2019, 12-18 months after execution of the
definitive agreements.
"This strategic partnership is a natural evolution of the
long-standing history of collaboration between Boeing and Embraer
on a range of aerospace initiatives over almost three decades,"
said Greg Smith, Boeing Chief
Financial Officer and Executive Vice President of Enterprise
Strategy & Performance. "It is aligned with Boeing's enterprise
strategy of pursuing strategic investment opportunities where they
demonstrate real value and accelerate our organic growth plans.
This partnership will strengthen the vertical capabilities of
Boeing and enhance value for our customers through the full
lifecycle of industry-leading products and services."
Boeing and Embraer will benefit from a broader scale, resources
and footprint, including global supply chain, sales and marketing,
and services network, which will enable them to capture benefits
from best-in-class efficiencies across the organizations.
Additionally, the strategic partnership will provide opportunities
to share best practices in manufacturing and across development
programs.
The transaction will have no impact on Boeing and Embraer
financial guidance for 2018 or Boeing's cash deployment strategy
and commitment to returning approximately 100 percent of free cash
flow to shareholders.
Forward-Looking Information Is Subject to Risk and
Uncertainty
Certain statements in this release may be "forward-looking"
within the meaning of the Private Securities Litigation Reform Act
of 1995, including statements regarding benefits and synergies of
the joint venture and future business prospects, as well as any
other statement that does not directly relate to any historical or
current fact. Forward-looking statements are based on current
assumptions about future events that may not prove to be accurate.
These statements are not guarantees and are subject to risks,
uncertainties and changes in circumstances that are difficult to
predict. Many factors could cause actual results to differ
materially from these forward-looking statements. As a result,
these statements speak only as of the date they are made and
neither party undertakes an obligation to update or revise any
forward-looking statement, except as required by law. Specific
factors that could cause actual results to differ materially from
these forward-looking statements include the effect of global
economic conditions, the ability of the parties to reach final
agreement on a transaction, consummate such a transaction and
realize anticipated synergies, and other important factors
disclosed previously and from time to time in the filings of The
Boeing Company and/or Embraer with the Securities and Exchange
Commission.
Media Contacts:
Chaz Bickers
Boeing Communications
charles.n.bickers@boeing.com
312-544-2002
Valtecio Alencar
Embraer Corporate Communications
valtecio.alencar@embraer.com.br
+5511-3040-6891
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SOURCE Embraer S.A.