Hi Everyone,
I have been following the Boeing (BA) and Embraer (ERJ) JV talks and based on what I've read, it seems like Boeing has cleared many hurdles to take an 80% control of Embraer's commercial aviation business.
What I'm confused about is the fact that Embraer's commercial aircraft division is being valued at $4.75 billion, but as of today, Embraer has a market cap of $3.93 billion (As per yahoo finance) and not somewhere closer to the $4.75B figure.
My first question is why the stock is trading so low, based on what Boeing has valued it at, which is $4.75 billion. I believe that ERJ shareholders would be paid out an amount that values ERJ at $4.75B when the deal closes, and not paid out 80% of the $4.75B, to reflect Boeing's ownership (is that correct?).
Are there other reasons why the stock isn't currently trading closer to its $4.75 billion valuation? I know that companies often trade below their proposed valuation while a merger/takeover is pending, but this seems to be too low...Even if there is talk that the merger may take awhile to close; Boeing is financially sound and it seems as though they cleared the biggest hurdles already.
The only other thing I can think of as to why this is happening is due to the upcoming election. Perhaps investors are nervous about who might be elected next in Brazil?
Thanks again!
I have been following the Boeing (BA) and Embraer (ERJ) JV talks and based on what I've read, it seems like Boeing has cleared many hurdles to take an 80% control of Embraer's commercial aviation business.
What I'm confused about is the fact that Embraer's commercial aircraft division is being valued at $4.75 billion, but as of today, Embraer has a market cap of $3.93 billion (As per yahoo finance) and not somewhere closer to the $4.75B figure.
My first question is why the stock is trading so low, based on what Boeing has valued it at, which is $4.75 billion. I believe that ERJ shareholders would be paid out an amount that values ERJ at $4.75B when the deal closes, and not paid out 80% of the $4.75B, to reflect Boeing's ownership (is that correct?).
Are there other reasons why the stock isn't currently trading closer to its $4.75 billion valuation? I know that companies often trade below their proposed valuation while a merger/takeover is pending, but this seems to be too low...Even if there is talk that the merger may take awhile to close; Boeing is financially sound and it seems as though they cleared the biggest hurdles already.
The only other thing I can think of as to why this is happening is due to the upcoming election. Perhaps investors are nervous about who might be elected next in Brazil?
Thanks again!