News
Brazil gives Boeing-Embraer union crucial approval
February 1st 2019
Boeing could complete its US$4.2 billion deal to acquire 80% of Embraer commercial aircraft operations by year end following the Brazilian government’s approval of the proposed joint venture last month and the agreement of the Embraer board to the partnership soon afterwards. Read More »
Boeing and Embraer issued a joint statement on January 11 that noted a “strategic partnership that will position both companies to accelerate growth in global aerospace markets”. The new Brazilian government, elected on January 1, said the venture would preserve current employment at Embraer in Brazil but acknowledged the sale had provoked controversy domestically.
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In December, left leaning politicians and union leaders mounted two separate efforts to block the sale but lost their cases in the courts. Opposition to the sale will continue until the joint venture is ratified by all stakeholders, analysts forecast. Embraer’s private shareholders must cast their vote on the deal by mid this month.
Winning Brazilian government approval for a restructured Embraer has been the biggest hurdle to Boeing’s proposed 80% acquisition of the South American aircraft manufacturer. If approved by shareholders, the joint venture partners must then apply for regulatory approval in several countries and sequentially address closing conditions for the transaction. In their statement, the two manufacturers anticipated the deal would be completed in December this year.
The Boeing/Embraer partnership will produce aircraft for the commercial aircraft “mid-market” of 70 to 150 passengers that includes the Embraer E-Series and the latest E-Jet E2 twin-engine narrow body. Boeing has not revealed if it will re-christen the Embraer jets with the Boeing brand.
Strategically, adding Embraer’s jets to the Boeing portfolio will counter the integration of Bombardier’s C-Series medium-range airliners, now known as the A220 family, into the Airbus commercial aircraft product line.
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On the defence front, Boeing and Embraer have agreed to set up a separate joint venture to develop new markets for Embraer’s KC-390 multi-mission medium airlift helicopter. Embraer will retain majority in the new structure (51%) with Boeing holding the remaining equity of 49%.
The January announcement ended weeks of uncertainty about the merger as the Brazilian government appeared hesitant about signing off on the politically sensitive deal. Shortly after assuming the presidency last month, Jair Bolsonaro, a far right leader and former army captain, said Boeing could end up owning all of Embraer if the deal was approved under the terms proposed.
But a later statement issued by his office said his government had analyzed the proposal and found that it “preserves (Brazil’s) sovereignty and the national interests”. While Boeing would gain control of Embraer, the two manufacturers would “maintain the current jobs in Brazil”, he said, which would appease unions and politicians who feared job losses at Embraer factories from consolidation of the two companies.
