Boeing proposes up to 90% stake in new Embraer venture
February 7, 2018 | 1:23 PM
by Reuters
A Boeing 737 MAX and an Embraer E190-E2 plane. - Reuters file picture

Brasilia: Boeing has presented a plan to Brazil's government that would give it an 80 to 90 per cent stake in a new venture encompassing Embraer's commercial jet business, a Brazilian newspaper reported on Tuesday.

The plan Boeing presented to the government on Thursday would let it take over Embraer's commercial operations by creating a new company, with defence operations remaining under the Brazilian planemaker's control in order to meet government demands, Valor Economico reported, without citing a source.

Reuters previously reported on Friday that Boeing was seeking approval in Brasilia for a plan creating a new joint company that excluded defense operations.

President Michel Temer's chief spokesman, Marcio de Freitas, said that only the Defence Ministry could evaluate Boeing's tie-up plans with Embraer. The Defence Ministry declined comment on the Valor report of a new Boeing proposal.

Boeing and Embraer did not immediately respond to requests for comment.

Valor reported that under the proposal Boeing would pay Embraer in cash when the commercial assets are transferred to the new company, with most of the proceeds then distributed to shareholders as dividends.

Boeing's tie-up with Embraer, the world's third-largest planemaker, would give it a leading share of the 70- to 130-seat market, meaning stiffer competition for Bombardier and Airbus SE's joint CSeries programme.

Embraer would retain the defence business that generates almost nothing in earnings before interest, taxes, depreciation and amortisation. Shareholders would also have 10 to 20 per cent of the commercial activities transferred to the new company and be entitled to dividends.

The deal would maintain the government's so-called golden share in Embraer, a former state enterprise, giving it veto power over certain strategic decisions, including Boeing's current push for a tie-up.

The plan — if supported by the government and Embraer — could be presented to shareholders for approval as soon as the second quarter, the newspaper said. Further meetings between Boeing and the government will not occur until after the Carnival holiday, which ends next week, it reported.

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