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!
Hmm besides the fact that this is not a direct acquisition , you should remember that Brazilian companies carry a lot of risk, especially in terms of accounting. Remember Petrobras?