Boeing will buy a controlling stake in the commercial aircraft arm of Brazilian planemaker Embraer under a new $4.75-billion joint venture, the companies said on Thursday, cementing a global passenger jet duopoly.
The new company, encompassing Embraer's commercial aircraft and services businesses, should make Boeing the market leader for smaller passenger jets, creating stiffer competition for the CSeries aircraft program designed by Canada's Bombardier and backed by European rival Airbus.
The deal values Embraer's commercial aircraft operations, the world's third-largest, at $4.75 billion and Boeing's 80-percent ownership stake in the joint venture at $3.8 billion, the companies said.
Boeing is expected to pay for its share of the venture in cash, according to a person familiar with the matter. The statement gave no indication of any payment Boeing was making under the deal.
Embraer will hold the remaining 20 percent of the venture and keep control of its defense and business jet operations. Concern over U.S. influence in Brazilian military programs had raised red flags in Brasilia, which can still veto the deal.
However, recent signals from Brazil's President Michel Temer and military officials suggested the government is satisfied with the new structure of the tie-up, as long as Brazilian jobs are maintained and Embraer continues to develop new technology.
With timely approval from the government, regulators and shareholders, Boeing and Embraer said they expect to close the deal by the end of next year.
The partnership is expected to add to Boeing's earnings per share from 2020, generating annual pre-tax cost savings of about $150 million by the third year, the companies said.