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Boeing-Embraer JV Clears Biggest Hurdle With Brazilian Government OK

The Brazilian government late Thursday approved a Boeing (BA)-Embraer (ERJ) joint venture that gives Boeing control of Embraer’s commercial aircraft unit.





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Late Friday, Embraer’s board of directors approved the deal, but Brasilia was seen as the biggest hurdle. The government owns a “golden share” in Embraer, allowing it to veto any tie-ups.

Under the terms of the deal, Boeing and Embraer will form a joint venture that includes the Brazilian company’s commercial aircraft and services operations. Boeing will pay $4.2 billion for an 80% ownership stake in the JV.

Newly elected President Jair Bolsonaro had voiced concerns that the deal could lead to Boeing eventually taking over all of Embraer, but later he said “the sovereignty and interests of the nation are preserved.”

The companies also vowed to “maintain the current jobs in Brazil,” after previously avoiding such a pledge.

But the Boeing-Embraer deal would still need regulatory approval in several countries, and it could face lawsuits from minority shareholders and labor unions.

The companies expect the deal to close by the end of the year.

Boeing shares closed up 0.1% at 352.90 on the stock market today. Embraer’s U.S.-listed shares rose 2.6% to 23.23.

Boeing-Embraer JV’s Long Journey

Talk of a tie-up surfaced in late 2017 after Airbus (EADSY) announced an acquisition deal for a majority stake in Bombardier‘s (BDRBF) C Series business.

After that, Boeing had to convince Brazilian officials, including top military officers, that one of the country’s top companies would be preserved.

Embraer’s military jet unit had been a major sticking point for Brazil’s government. So a full Embraer takeover reportedly was off the table early on.

In addition to facing skepticism from Bolsonaro, the Boeing-Embraer deal also faced late challenges from Brazil’s judicial system.

In December, a judge issued an injunction on the deal after Embraer’s union filed a class action lawsuit. But it was later overturned. That decision followed a prior injunction which was also overruled shortly afterward.

Boeing is reportedly interested in Embraer’s engineering expertise as it considers building a new middle-of-the-market plane that can better compete against Airbus’ A320neo jet.

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About Amy Harvey

Amy R. Harvey writes forStartUps Sections In AmericaRichest.

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