Boeing-Embraer merger going ahead after Bolsonaro approval

Boeing will now control 80 percent of Embraer's business with only the Brazilian company's military division remaining independent

Boeing-Embraer merger going ahead after Bolsonaro approval

The Brazilian government on Thursday said it would allow a proposed tie-up between plane makers Embraer SA and Boeing go forward, capping weeks of uncertainty in which President Jair Bolsonaro expressed hesitation.

That approval is crucial to the $4.2 billion deal, because the government holds a "golden share" in Embraer that could have been used to veto the arrangement.

Boeing plans to take control of Embraer by creating a joint venture and with that better compete against rivals Airbus and Bombardier, which formed a joint venture for the construction and sale of the Airbus A220 (formerly known as Bombardier CSeries) in July 2018.

On Thursday, Bolsonaro had said he was satisfied that "the final proposal preserves (Brazil's) sovereignty and national interests".

A joint statement from the two companies said they "welcomed approval by the Government of Brazil of the strategic partnership that will position both companies to accelerate growth in global aerospace markets". With the acquisition, the Brazilian engineers could help develop Boeing's next new airplane, the New Mid-market Airplane (NMA), referred to informally as the 797.

Boeing shares closed up 2.5 per cent on Thursday and were flat in after-hours trade after the deal approval.

Under those terms, Boeing will install Brazil-based management, including a president and chief executive officer reporting to Boeing Chairman Dennis Muilenburg in Chicago.

While Embraer, the third largest manufacturer in the world behind Boeing and Europeans Airbus, was privatised in 1994, the Brazilian government retained a veto power of its strategic decisions.

Another potential stumbling block was the fear of US control over Brazilian defense work.

The closing of the transaction will be subject to shareholder and regulatory approvals and is meant to be finalised by the end of 2019.

Boeing said this process is expected to be completed and the transaction finalized by the end of 2019.

Latest News