This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. For an explanation of our Advertising Policy, visit this page.
Boeing still has its eyes set on Embraer, the third-largest planemaker in the world. Just days after it was reported that Boeing and the Brazilian aircraft maker had agreed to form a commercial jet joint venture, Boeing has now proposed to acquire up to a 90% stake of the venture, which would include Embraer’s entire commercial division.
What Boeing is after is Embraer’s market share in jets up to 150 seats, where the US planemaker does not have a competitive offering. Its smallest jet, the new 737 MAX 7, which rolled out of the factory on Monday, has sold very poorly with only about 50 ordered. Arch-rival Airbus is poised to do well in that segment after buying the C Series jet program, the most modern jet in the 100 to 150 seat market, from Bombardier. Embraer, with decades of expertise building smaller jets, would be a big strategic play for the American company.
As reported by Brazilian business paper Valor Econômico, Boeing has submitted a proposal to the Brazilian government, which, if approved, would allow it to take control over Embraer’s commercial operations via the formation of a new company. In all, the new company could give Boeing a stake between 80% and 90% in Embraer. Under this proposal, Embraer’s defense operations would still be controlled by the Brazilian company, ensuring that the military arm of Embraer — which the government considers vital to national security — remains under state control. The Brazilian government would also maintain its golden share in Embraer. This would allow it to maintain veto power when it comes to certain strategic decisions.
According to Valor, Boeing would pay Embraer in cash when commercial assets are transferred to the new company, with a majority of the proceeds then being distributed to shareholders as dividends.
In order for the deal to go through, it’ll require the government’s approval as well as support from Embraer itself. If it does get the necessary support, the deal could be presented to shareholders as soon as the second quarter. For now, Boeing and the Brazilian government are putting deal talks on hold until after the Carnival holiday, which ends next week.
Featured image by AFP / Staff / Getty Images.
Know before you go.
News and deals straight to your inbox every day.
With great travel benefits, 2x points on travel & dining and a 50,000 point sign up bonus, the Chase Sapphire Preferred is a great card for those looking to get into the points and miles game. Here are the top 5 reasons it should be in your wallet, or read our definitive review for more details.
- Earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $625 toward travel when you redeem through Chase Ultimate Rewards®
- Chase Sapphire Preferred named "Best Credit Card for Flexible Travel Redemption" - Kiplinger's Personal Finance, June 2018
- 2X points on travel and dining at restaurants worldwide & 1 point per dollar spent on all other purchases.
- No foreign transaction fees
- 1:1 point transfer to leading airline and hotel loyalty programs
- Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards. For example, 50,000 points are worth $625 toward travel
- No blackout dates or travel restrictions - as long as there's a seat on the flight, you can book it through Chase Ultimate Rewards