Boeing, Embraer agree on $4.75B deal, creating stiffer competition for Canada’s Bombardier

In this April 13, 2017 file photo, a pilot waves from the flight deck of a Boeing 737 MAX 9 as it rolls out for the airplane's first flight, in Renton, Wash. AP Photo/Ted S. Warren

Boeing Co. will take over the $4.75 billion commercial aircraft arm of Brazilian plane-maker Embraer SA as part of a new company to be controlled by the U.S. firm, the companies said on Thursday.

The new company, encompassing Embraer’s commercial aircraft and services businesses, should make Boeing the market leader in the smaller passenger jet market, creating stiffer competition for the CSeries aircraft program designed by Canada’s Bombardier Inc and backed by European rival Airbus SE..

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The deal values Embraer’s commercial aircraft operations at $4.75 billion, and Boeing’s 80 per cent ownership stake in the joint venture at $3.8 billion, the companies said.

Under the terms of the deal, Boeing will hold an 80 percent stake in the joint venture and Embraer the remaining 20 per cent.

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The partnership is expected to add to Boeing’s earnings per share from 2020 and would generate estimated annual pre-tax cost savings of about $150 million by the third year.

The statement gave no indication of any payment Boeing was making under the deal.

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Boeing’s initial plan to buy Embraer was rejected by the Brazilian government because it did not want a foreign company to control its defense unit for strategic security reasons.

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, they said.

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