Embraer SA (NYSE:ERJ) rose Monday after announcing Boeing would acquire 80% of the company for $4.2 billion.
The transaction remains subject to approval by the government of Brazil, after which Embraer and Boeing intend to execute definitive transaction documents.
The closing of the transaction will then be subject to shareholder and regulatory approvals and customary closing conditions.
The partnership is expected to be neutral to Boeing's earnings per share in 2020 and accretive thereafter. Estimated annual pre-tax cost synergies of approximately $150 million are anticipated by the third year of operations.
Once the transaction has closed, 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 Boeing CEO Dennis Muilenburg. Embraer will retain consent rights for certain strategic decisions, such as transfer of operations from Brazil.
The companies have also agreed to the terms of another joint venture to promote and develop new markets for the multi-mission medium airlift KC-390.
Under the terms of this proposed partnership, Embraer will own a 51% stake in the joint venture, with Boeing owning the remaining 49%.
Once the parties have executed the definitive transaction agreements, the strategic partnership will then be subject to shareholder and regulatory approvals, as well as other customary closing conditions.
Assuming the approvals are received in a timely manner, the transaction is intended to close by the end of 2019.
Shares added $1.08, or 5.2%, to $22.20
