Business Context and Reporting Period
This Form 6-K filing by Embraer S.A. covers the period ending December 17, 2018. The report details a Material Fact regarding a strategic partnership between Embraer and The Boeing Co. ("Boeing"). The transaction involves the segregation of Embraer's commercial aviation business unit into a new entity ("New Company" or "Commercial Aviation JV") and the formation of a separate joint venture for the KC-390 multi-mission airplane.
Key Financial Metrics
The filing focuses on transaction valuation rather than standard operating financial results for the period.
- Enterprise Value: The Commercial Aviation JV is valued at US$ 5.26 billion.
- Transaction Value: Boeing Brazil will acquire an 80% interest in the Commercial Aviation JV for an aggregate estimated value of US$ 4.2 billion.
- Expected Proceeds: Embraer expects net proceeds of approximately US$ 3 billion after separation costs.
- Cost Sharing: Any reductions in separation costs prior to closing will be shared equally between Embraer and Boeing.
- Financial Impact: The filing states it is not possible at this time to determine the net effect of the Transaction on the Company's results.
The filing does not provide specific data on revenue, profit, cash flow, margins, debt, or liquidity for the reporting period.
Material Changes and Transaction Structure
The Board of Directors approved the transaction in principle, subject to Brazilian Federal Government authorization and other conditions. Key structural changes include:
- Commercial Aviation JV: Boeing Brazil will hold 80% of the share capital; Embraer will retain 20%.
- KC-390 JV: A separate joint venture will be formed for the KC-390 program, with Embraer holding 51% (controlling interest) and Boeing holding 49%.
- Remaining Business: Embraer will retain its defense & security and executive jets businesses, which will not be segregated.
- Put Option: Embraer retains the right to sell its 20% interest in the Commercial Aviation JV to Boeing. The price will be based on the closing date price adjusted for inflation if exercised within the Lock-Up Period, or fair value if exercised thereafter.
Guidance, Risks, and Contingencies
The consummation of the transaction is contingent upon several approvals and conditions:
- Government Approval: Requires prior approval from the Brazilian Federal Government due to its ownership of a "golden share."
- Shareholder Approval: Requires ratification by Embraer shareholders at an Extraordinary General Meeting.
- Regulatory Approval: Requires approval from antitrust authorities in Brazil, the United States, and other applicable jurisdictions.
- Lock-Up Period: A 10-year lock-up period applies, during which neither party can dispose of their shares in the New Company.
- Uncertainty: The filing explicitly states that it is not possible to guarantee the consummation of the Transaction at this moment.
Investor Verification Checklist
- Verify the status of the Brazilian Federal Government's approval regarding the "golden share."
- Monitor the schedule and outcome of the Extraordinary General Meeting for shareholder ratification.
- Track antitrust clearance progress in Brazil and the United States.
- Review the definitive agreements for specific terms regarding the Put Option pricing mechanism and separation cost calculations.
- Confirm the final net proceeds to Embraer once separation costs are finalized.