The companies announced today that the proposed strategic partnership between Boeing and Embraer was approved today by Embraer’s shareholders during an Extraordinary General Shareholders’ Meeting held at the company’s headquarters in Brazil.
At the special meeting, 96.8% of all valid votes cast were in favor of the transaction, with the participation of approximately 67% of all outstanding shares. Shareholders approved the proposal that will establish a joint venture made up of the commercial aircraft and services operations of Embraer. Boeing will hold an 80% ownership stake in the new company, and Embraer will hold the remaining 20%.
The transaction values 100% of Embraer’s commercial aircraft operations at $5.26 billion and contemplates a value of $4.2 billion for Boeing’s 80% ownership stake in the joint venture.
Embraer shareholders also agreed to a joint venture to promote and develop new markets for the multi-mission medium airlift KC-390. Under the terms of this proposed partnership, Embraer will own a 51% stake in the joint venture, with Boeing owning the remaining 49%.
With that out of the way, now comes the even harder part.
- How will the cultures mix? We have seen the Airbus/Bombardier culture was able to coalesce around shared values and quickly found its way. The Brazilians are rightly proud of what they accomplished at Embraer. Now comes “the Boeing way”. This is going to be interesting.
- Embraer’s management pulled off a big win with the pricing by getting Boeing to pay as much as it did. Consider the deal Airbus got on the C Series program and realize that deal is arguably the best commercial aerospace deal in the history of the industry. Airbus is already billions ahead in savings.
- The KC-390 is something we can expect to hear a lot more about shortly. Absent the Boeing deal, the KC-390 was on its way to becoming Embraer’s A380. Boeing will push the KC-390 hard to compete with the venerable C-130. Without Boeing, the KC-390 wasn’t going anywhere. Now it may become a player.
- While discussing the military side, the Tucano is the other product that is clearly “best in class”. Will Embraer develop this model further? What about taking the highly regarded bizjet platforms to develop more variants with special mission platforms? Then there is the Gripen program that will draw Embraer into a far more advanced area of the business.
- The leftover Embraer parts, particularly business jets will be an area to watch. Embraer’s best and brightest stars will want to get on the Boeing bandwagon. Embraer had a brilliant talent pool that rotated among programs. They developed a new aircraft every year for 15 years. Now what? How does the Embraer business jet unit compete with Bombardier and Gulfstream? Yes, Embraer Brazil will have a billion dollars in the bank, but how to deploy and invest that? The big Lineage model did not sell well. Does Embraer now consider developing its own big bizjet? The smaller Praetor and Phenom are doing well. But it is the big iron that gets the attention. Embraer has excellent technologies it can bring to the market in a new big airplane.
It is going to be fascinating to watch as the big duopoly transforms into a cartel. Lots of new forces at work. Endless issues and questions.