page_title: Boeing–Embraer joint venture
section_title: July 2018 Memorandum of Understanding
hierarchical_section_title: Boeing–Embraer joint venture / History / July 2018 Memorandum of Understanding
caption_attribution_description: British Airways Embraer ERJ-170; G-LCYF@ZRH;22.09.2010/586bh
context_page_description: Boeing Brasil–Commercial was a proposed joint venture between Boeing and Embraer to design, build, and sell commercial airliners worldwide. The partnership was established in February 2019, after Boeing agreed to purchase an 80% stake in Embraer's commercial aircraft division. The deal was approved by Embraer's shareholders and was expected to close in June 2020 pending antitrust reviews, but in April 2020 Boeing terminated the joint venture deal due to impact of the 2019–20 coronavirus pandemic on aviation. Embraer alleges that the financial impact of the Boeing 737 MAX groundings contributed to the demise of the deal, while others allege that U.S. labor and political considerations played a role.
context_section_description: On July 5, 2018, a Memorandum of Understanding was announced for a strategic partnership: for $3.8 billion Boeing would have an 80% stake in a joint venture with Embraer, which would produce and service Embraer's commercial airliners (the ERJ, E-Jet and the E-Jet E2), a business that at the time was valued at $4.75 billion and offer $150 million worth of corporate synergy opportunities. Under the proposed joint venture, Embraer would retain its executive business jet and its defense industry businesses, but the two companies could explore a second joint venture for the C-390 Millennium defense aircraft. Boeing would control the new company, which would managed from Brazil with leaders who report to Boeing's CEO. A lock-up agreement would prevent Embraer or Boeing from selling their shares for 10 years. A put option would protect the minority stake value, allowing Embraer to sell its shares at the same price, inflation adjusted. At the time of the announcement, the deal was expected to be approved by shareholders and government regulators by the end of 2019.
  Despite the proposed deal being converted from a takeover to a joint venture, it remained controversial within the Brazilian government.  The lame-duck government of embattled Brazilian President Michel Temer opposed the deal, but president-elect Jair Bolsonaro, who would take office on January 1, 2019, supported it.  The deal was also opposed by the left-wing Brazilian Workers Party, and four congressmen obtained an injunction from the Brazilian federal court Judge Victor Giuizo Neto to block the joint venture, saying that it would give away the profitable airliner division and would remove it from the Brazilian Government control. The following week, the injunction was overturned by an appeals court.
  Aviation industry publication Leeham News noted that the deal would be good for both companies, as Boeing needed Embraer's smaller jets and Embraer needed Boeing's marketing power as the E-Jet E2 family was selling slowly, in part due customers were waiting for the joint venture deal to close, and the E175-E2 being too heavy to be sold to U.S. airlines due to scope clause limitations.
  On December 17, 2018, Boeing announced that it was now offering to pay $4.2 billion for its 80% stake in the commercial aircraft joint venture, valuing the business at $5.25 billion. At the same time the two companies announced that they were exploring establishing a second joint venture that would market the C-390 Millennium defense aircraft.
  Unions representing Embraer employees filed a class action lawsuit to block the deal on December 20, 2018, and Judge Victor Giuizo Neto again granted an injunction saying, “The brutal asymmetry in the shareholder structure of this venture prevents it from being carried out without compromising the survival of national interests." The injunction was appealed by Embraer and was overturned two days later with Federal Court President Therezinha Cazerta saying the case was outside the court's purview.
  On January 10, 2019, the new Brazilian government approved the deal saying that it secured a new deal to "maintain the current jobs in Brazil" and a commitment to transfer production of executive business jets from the commercial jet factory in São José dos Campos to the Gavião Peixoto factory, where Embraer's defense business is based.
caption: An Embraer 170 (bottom) pictured with a Boeing 737-800 (top), the E-jets are sized below the 737, which is Boeing's smallest airliner
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