Boeing and Embraer have signed a memorandum of understanding to establish a strategic partnership that positions both companies to accelerate growth in global aerospace markets.

The news follows the completion of a deal between Airbus and Bombardier that will see the European aerospace giant take a controlling stake in the C Series programme.

The non-binding agreement proposes the formation of a joint venture comprising the commercial aircraft and services business of Embraer that would strategically align with Boeing’s commercial development, production, marketing and lifecycle services operations.

Under the terms of the agreement, Boeing will hold an 80 per cent ownership stake in the joint venture and Embraer will own the remaining 20 per cent.

“By forging this strategic partnership, we will be ideally positioned to generate significant value for both companies’ customers, employees and shareholders – and for Brazil and the United States,” said Dennis Muilenburg, chief executive of Boeing.

“This important partnership clearly aligns with Boeing’s long-term strategy of investing in organic growth and returning value to shareholders, complemented by strategic arrangements that enhance and accelerate our growth plans.”

The transaction values 100 per cent of Embraer’s commercial aircraft operations at $4.75 billion, and contemplates a value of $3.8 billion for Boeing’s 80 per cent ownership stake in the joint venture.

The proposed partnership is expected to be accretive to Boeing’s earnings per share beginning in 2020 and to generate estimated annual pre-tax cost synergies of approximately $150 million by year three.

On finalisation, the commercial aviation joint venture will be led by Brazil-based management, including a president and chief executive.

Boeing will have operational and management control of the new company, which will report directly to Muilenburg.

The joint venture will become one of Boeing’s centres of excellence for end-to-end design, manufacturing, and support of commercial passenger aircraft, and will be fully integrated into Boeing’s broader production and supply chain.

Boeing and the joint venture would be positioned to offer a comprehensive, highly complementary commercial airplane portfolio that ranges from 70 seats to more than 450 seats and freighters, offering best-in-class products and services to better serve the global customer base.

In addition, both companies will create another joint venture to promote and develop new markets and applications for defence products and services, especially the KC-390 multi-mission aircraft, based on jointly-identified opportunities.

“The agreement with Boeing will create the most important strategic partnership in the aerospace industry, strengthening both companies’ leadership in the global market,” said Paulo Cesar de Souza e Silva, Embraer chief executive.

“The business combination with Boeing is expected to create a virtuous cycle for the Brazilian aerospace industry, increasing its sales potential, production, creating jobs and income, investments and exports, and in doing so, adding more value to customers, shareholders and employees.”

Finalisation of the financial and operational details of the strategic partnership and negotiation of definitive transaction agreements are expected to continue in the coming months.

Upon execution of these agreements, the transaction would then be subject to shareholder and regulatory approvals, including approval from the government of Brazil, as well as other customary closing conditions.

Assuming the approvals are received in a timely manner, the transaction is expected to close by the end of 2019, 12-18 months after execution of the definitive agreements.