SAO PAULO (Reuters) - Boeing Co (BA.N) will buy a controlling stake in the commercial aircraft arm of Brazilian planemaker Embraer SA (EMBR3.SA) 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 Inc (BBDb.TO) and backed by European rival Airbus SE (AIR.PA).
The deal values Embraer’s commercial aircraft operations, the world’s third-largest, at $4.75 billion and Boeing’s planned 80-percent stake in the venture at $3.8 billion, the companies said.
For Embraer, Airbus’s announcement last year it would take control of the CSeries jet from Bombardier put real marketing weight behind a fragile competitor, while for Boeing the transatlantic tie-up threatened to expand the revenue base and cash-generating potential of its European arch-rival.
The two deals represent the biggest realignment in the global aerospace market in decades. The new two-tier duopoly, putting Airbus and Bombardier on one side against Boeing and Embraer on the other, strengthens established Western planemakers against new entrants such as Commercial Aircraft Corp of China Ltd CMAFC.UL, analysts say.
Embraer shares fell 5.8 percent in New York and nearly 10 percent in Sao Paulo on disappointment at the financial terms of the long-awaited deal.
The transaction puts a lower-than-expected valuation on Embraer’s commercial aviation unit, BTG Pactual analyst Renato Mimica told clients, but he said there was still upside to Embraer shares, underscoring potential cost savings
