The Boeing Co and Embraer SA are reportedly closing in on a final agreement with the Brazilian government that would result in joint-venture ownership for the Embraer commercial aircraft business – a prospect that developed late last year.
Boeing reportedly is seeking to expand its share of the global commercial jet market; Embraer is the world’s third-largest civil aircraft manufacturer, with particular strength in regional and medium-range single-aisle jets. The prospective combination has been compared to the last year’s acquisition of a 50% stake in Bombardier’s C Series program by Boeing’s main rival, Airbus SA.
Embraer is a formerly state-owned aircraft designer and builder, now privately controlled. However, the Brazilian government retains a “golden share” in the business, giving it authority over the sale of the controlling interest.
In January, Boeing proposed establishing a joint-venture with Embraer to operate that company’s commercial aircraft business. Embraer’s defense aircraft division would not be involved in the new venture, and reportedly the government’s golden share would be preserved in the joint-venture ownership.
The capitalization of the new firm is not known. Recent reports from Brazil suggest Boeing would hold an 80.01% share of the new venture and Embraer would hold 19.99%, and that this arrangement is supported by Brazil.
However, the governance for the new firm remains under negotiation. It’s unclear what other objectives the government may have for a final agreement. Labor union leaders recently accused Brazilian officials of negotiating against workers’ interests to sell a government stake in Embraer’s commercial aircraft business.
