Thursday, 5 July 2018

Boeing and Embraer start joint venture......

Boeing and Embraer have announced the first stage in the Boeing take over plan of the Brazillian manufacturer, which is to establish a strategic partnership, that will allow both companies to collude on pricing, marketing, targeting, development, production, marketing and lifecycle services operations. The joint venture is also looking to apply increased pressure on other aeronautical companies in the supply chain of both manufacturers for better terms and to reduce the number of firms involved. 

The new joint-venture is 80 percent owned by Boeing, the remaining 20 percent taken by Embraer and is a direct result of the Airbus & Bombardier CSeries tie up and Boeings ambitions to dominate the global aircraft market in all sectors by decimating the competition "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," The Boeing boss said. 

Paulo Cesar de Souza e Silva, Embraer Chief Executive Officer and President said, "The agreement with Boeing will create the most important strategic partnership in the aerospace industry, strengthening both companies' leadership in the global market," 

"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 joint venture will see the end of Embraer's end-to-end design manufacturing, and support of commercial passenger aircraft as this will all be fully integrated into Boeing's broader production and supply chain.

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. 

Both Embraer and Boeing have been oddly silent on the number of job losses that the joint venture will cause once it has become fully operational, however according to local researchers, Embraer will loose over 400 positions as these job functions are migrated to Boeing.