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(AOF) – After many adventures, the American Boeing (-0.89% to 329.91 dollars) and the Brazilian Embraer finally announced the signing of a Memorandum of Understanding (MoU) on the creation strategic partnership. This non-binding agreement proposes the creation of a joint venture that will include Embraer's commercial aviation and services businesses, as well as their strategic alignment with the business development, production, marketing and management activities of Embraer. Boeing's life cycle.
Under the terms of the agreement, Boeing will hold an 80% interest in the joint venture, valued at $ 3.8 billion, and Embraer the remaining 20%. This transaction values Embraer's total commercial aviation business at $ 4.75 billion.
The transaction is designed to compete with Bombardier's CSeries program, to which Airbus has a majority interest.
Boeing and the joint venture intend to position themselves to offer a complete portfolio of highly complementary commercial aircraft (between 70 and over 450 seats), as well as cargo aircraft.
This partnership proposal is expected to have a relutive effect Boeing's earnings per share from 2020, generating estimated pre-tax annual cost synergies of approximately $ 150 million by the third year.
Boeing and Embraer ready to join as well in Defense
Once finalized, the joint venture dedicated to commercial aviation will be led by a management team based in Brazil, headed by a president t a general manager. The new entity will report directly to Dennis Muilenburg, Boeing's CEO.
In addition, the two companies have agreed to create another joint venture to promote and develop new markets and applications for Defense products and services, and in particular the KC-390 multi-mission aircraft based on jointly identified opportunities
The finalization of the financial and operational details of the strategic partnership and the negotiation of the definitive transaction agreements should continue in the coming months.
Subject to obtaining customary approvals in a timely manner, the transaction is expected to be completed by the end of 2019, 12 to 18 months after the signing of the definitive agreements.
This transaction does not alter Boeing's and Embraer's financial forecasts for 2018, or Boeing's capital deployment strategy and commits it to the company to donate about 100% of its free cash flow to its shareholders.
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