Pinheiro Neto, Trench Rossi Watanabe (Baker McKenzie), Baker McKenzie, Simpson Thacher & Bartlett, BMA – Barbosa, Müssnich, Aragão and Skadden advised on the deal
Boeing (NYSE: BA) and Embraer (B3: EMBR3, NYSE: ERJ) have signed a Memorandum of Understanding to establish a strategic partnership that positions both companies to accelerate growth in global aerospace markets.
The non-binding agreement proposes the formation of a joint venture comprising the commercial aircraft and services business of Embraer that would strategically align with Boeing’s commercial development, production, marketing and lifecycle services operations. Under the terms of the agreement, Boeing will hold an 80 percent ownership stake in the joint venture and Embraer will own the remaining 20 percent stake.
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 strategic partnership will bring together more than 150 years of combined leadership in aerospace and leverage the two companies’ highly complementary commercial product lines. The partnership is a natural evolution of a long-standing history of collaboration between Boeing and Embraer over more than 20 years.
On finalization, the commercial aviation joint venture will be led by Brazil-based management, including a President and Chief Executive Officer. Boeing will have operational and management control of the new company, which will report directly to Muilenburg.
The joint venture will become one of Boeing’s centers of excellence for end-to-end design, manufacturing, and support of commercial passenger aircraft, and will be fully integrated into Boeing’s broader production and supply chain.
Boeing and the joint venture would be positioned to offer a comprehensive, highly complementary commercial airplane portfolio that ranges from 70 seats to more than 450 seats and freighters, offering best-in-class products and services to better serve the global customer base.
In addition, both companies will create another joint venture to promote and develop new markets and applications for defense products and services, especially the KC-390 multi-mission aircraft, based on jointly-identified opportunities.
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.
Pinheiro Neto Advogados advised Boeing Co. with Fernando Alves Meira (Picture), Fernando dos Santos Zorzo and Camila Carvalho Gomes.
Trench Rossi Watanabe (Baker McKenzie) advised Boeing Co. with Simone Dias Musa, Reinaldo Ravelli, Luciana Nobrega.
Baker McKenzie advised Boeing Co. with Jeff Maydew, Christine Sloan, Kai Kramer, Meaghan Wolfe and Kathryn Rimpfel.
Simpson Thacher & Bartlett advised Boeing Co. with S. Todd Crider.
BMA – Barbosa, Müssnich, Aragão advised Embraer with Paulo Cezar Aragão, Roberto Dias Carneiro, Barbara Rosenberg, Jose Otavio Haddad Faloppa, Luciana Marsal, Daniel Abraham Loria, Sandra Terepins, Igor Silva de Lima, Felipe Paschoalini, Ana Paula Reis, Andrea Silva de Oliveira, Maria Amaral de Almeida Sampaio, Pedro Henrique Serqueira, Vitor Silva Clark Nunes, Bianca Dutra da Silva Rego and Tatiane Kimie Siqui.
Skadden advised Embraer with Paul T. Schnell, Thomas W. Greenberg and Victor Hollender.
Involved fees earner: Simone Dias Musa – Trench, Rossi and Watanabe Advogados; Reinaldo Ravelli – Trench, Rossi and Watanabe Advogados; Luciana Nobrega S. Loureiro – Trench, Rossi and Watanabe Advogados; Paulo Cezar Aragão – Barbosa, Müssnich & Aragào; Roberto Dias Carneiro – Barbosa, Müssnich & Aragào; Luciana Rainho Marsal – Barbosa, Müssnich & Aragào; Bianca Dutra da Silva Rego – Barbosa, Müssnich & Aragào; Igor Silva De Lima – Barbosa, Müssnich & Aragào; Felipe Paschoalini – Barbosa, Müssnich & Aragào; Ana Paula Reis – Barbosa, Müssnich & Aragào; Pedro Henrique Serqueira e Souza – Barbosa, Müssnich & Aragào; Vitor Silva Clark Nunes – Barbosa, Müssnich & Aragào; Barbara Rosenberg – Barbosa, Müssnich & Aragào; Tatiane Kimie Siqui – Barbosa, Müssnich & Aragào; Sandra Terepins – Barbosa, Müssnich & Aragào; Maria Amaral de Almeida Sampaio – Barbosa, Müssnich & Aragào; José Otavio Haddad Faloppa – Barbosa, Müssnich & Aragào; Daniel Abraham Loria – Barbosa, Müssnich & Aragào; Andrea Silva De Oliveira – Barbosa, Müssnich & Aragào; Fernando Alves Meira – Pinheiro Neto; Fernando Zorzo – Pinheiro Neto; Camila Carvalho Gomes – Pinheiro Neto; Todd Crider – Simpson Thacher & Bartlett; Paul Schnell – Skadden Arps Slate Meager & Flom; Thomas Greenberg – Skadden Arps Slate Meager & Flom; Victor Hollender – Skadden Arps Slate Meager & Flom; Jeff Maydew – Baker McKenzie; Christine Agnew Sloan – Baker McKenzie; Kai Kramer – Baker McKenzie; Meaghan Wolfe – Baker McKenzie; Kathryn Rimpfel – Baker McKenzie;