Embraer shares take off after Bolsonaro approves Boeing merger

Marco Green
January 12, 2019

Shortly after assuming the presidency on January 1, Mr. Bolsonaro, a former army captain, had expressed concern that Boeing might end up owning all of Embraer if the deal was approved under the terms proposed.

The Brazilian government today approved the creation of a joint venture that would give Boeing control over Embraer's commercial airplane operation. It follows a similar deal by Boeing's rival Airbus, which bought Bombardier Inc.'s commercial plane division that competed with Embraer.

On Thursday, a statement published by the presidency said Bolsonaro was satisfied that "the final proposal preserves (Brazil's) sovereignty and national interests" and hence he would not exercise his "veto" right to scupper the merger.

Embraer designs and builds 76- to 130-seat regional airplanes called E-jets.

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".

Boeing has been trying for years to tap into Embraer's engineering capabilities.

Yet after the announcement Thursday of government approval, Boeing spokesman Chaz Bickers said there are no changes or additions made to the terms announced in December.

As part of the planned joint venture, Boeing will acquire an 80% ownership stake, while Embraer will hold the remaining 20 percent.

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

At the moment, the Brazilian government has full veto power at Embraer but would be forced to give up all control of the nation's aircraft manufacturer to the American company.

If approved by shareholders, the companies will then have to seek regulatory approval.

Other reports by Click Lancashire

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