Embraer and Boeing announce agreement to create new airline

After months of negotiations, Boeing and Embraer have announced they have reached an agreement for the creation of a new company, which will involve the Embraer's commercial aviation business. The new company, valued at $ $4.75 is born billion, will have a stake of 80 percent of Boeing and 20% of the brazilian company. Under the agreement, Boeing will pay $ $3.8 billion to Embraer. Security and defence areas and executive jets were left out of the agreement. The two companies have reported, however, that will create another joint venture in the area of Defense, but without specifying the terms of this partnership. According to statement released by the companies, the new company will be run by a team of executives who will be based in Brazil, but answering directly to the President of Boeing, Dennis Muilenburg. The American Group will have "operational control and management" of the new company. Although the basic agreement have been defined, the financial and operational details should still continue to be discussed in the coming months. After that, according to the statement, the agreement will be subject to "regulatory approvals and of shareholders, including the approval of the Brazilian Government, as well as other customary conditions relevant to the conclusion of a transaction of this type". The evaluation is that, if all the approvals are granted in the allotted time, the transaction is effectively locked until the end of 2019. "This partnership is clearly aligned with the long-term strategy of the Boeing to invest in organic growth and return value to shareholders, complemented by strategic agreements that enhance and accelerate our growth plans," said Muilenburg, in the statement. "This agreement with Boeing will create the most important aerospace industry strategic partnership, strengthening both companies and your leadership position on the world market," said Paulo Cesar de Souza e Silva, President of Embraer. The information that the companies would have reached a consensus and that details of the agreement would be released today was anticipated by the columnist Sonia Racy. The two companies announced on day 21 of December of last year that they were studying a possible combination "of its activities. The obstacle to the agreement was the federal Government. Although Embraer be a private company – and have more foreign shareholders than Brazilians, the Government holds a special action (known as golden share) that gives him veto power in some important decisions, such as the creation or amendment of programs military or the transfer of ownership. Hence the need to talk to the plateau, which was mainly in relation to the inclusion of the defense and security area in the negotiations. Effectively, this unit was outside the joint venture announced today, and will be the subject of a different partnership, not yet specified. According to Embraer, even after the agreement, the Union will remain with the rights deriving from the golden share. The terms of the memorandum of understanding issued earlier by Boeing and Embraer, detailing the structure of the possible partnership between them, has been well evaluated by banco Safra. "We're Still investigating more thoroughly the announcement, but our first reading is positive. The agreement will evaluate the commercial aviation unit of Embraer at $ $4.57 billion, a figure close to the Embraer's market capitalization yesterday, $ $4.8 billion, implying a valuation below market for the other threads of Embraer, as the Executive aviation and Defense, "writes the analyst Lucas Marquiori. New society. The new company, controlled by Boeing, will be administered by a Board of Directors and a Board of Directors. Embraer, for your time, have rights and governance of veto on certain matters, in compliance with terms and conditions to be set out in the definitive documents. The joint venture will have a dividend policy and subordination and the two companies will not be able to dispose of their shares issued by the new company for a period of 10 years (lock-up period) after the closing of the operation. Allied to this, the definitive documents shall provide other rules for the transfer of shares, including rights of first offer, joint sales (tag along) and the right to make the joint sale (drag along), in usual terms for operations of this type, and the lock-up period. Embraer will have the right, under certain circumstances, to sell your stake in the new company to Boeing.