Boeing, Embraer Enter Strategic Partnership

Boeing and Embraer have agreed to the formation of a joint venture to develop regional jets.

On Thursday, the two companies announced they have signed a memorandum of understanding to enter into a strategic partnership, which will see the two manufacturers work together on 100- to 150-seat aircraft.

The single-aisle market accounts for more than two-thirds of the expected global future demand for aircraft.

Boeing will hold an 80 percent ownership stake in the joint venture while Brazil-based Embraer will own the remaining 20 percent stake. Once finalized, the joint venture will be based in Brazil, with management reporting directly to Boeing’s Chairman, President and CEO, Dennis Muilenburg.

“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,” Muilenburg said in a statement. “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.”

In his own statement, Embraer President and CEO Paulo Cesar de Souza e Silva said the agreement “will create the most important strategic partnership in the aerospace industry.”

“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 move comes just months after rivals Airbus and Bombardier announced plans to partner on the latter’s C Series aircraft.

The transaction values Embraer’s commercial aircraft operations at $4.75 billion and isn’t expected to be accretive to Boeing’s earnings per share until 2020.

Subject to shareholder and regulatory approvals, the transaction is expected to close by the end of 2019.

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