Boeing/Embraer Deal Officially Cancelled - Embraer Seeks Damages

image

Minutes ago, Boeing announced its partnership with Embraer was cancelled.

The joint venture between Boeing and the Brazilian regional jet manufacturer Embraer has officially been cancelled after Embraer “did not satisfy the necessary conditions”.

This deal between the two manufacturers would’ve had Boeing acquiring an 80% stake in Embraer worth $4.2 billion while Embraer retained the remaining 20%.

This acquisition would’ve renamed Embraer as “Boeing Brasil Commercial”.

Marc Allen, president of Embraer Partnership & Group Operations:

“Boeing has worked diligently over more than two years to finalize its transaction with Embraer. Over the past several months, we had productive but ultimately unsuccessful negotiations about unsatisfied MTA conditions. We all aimed to resolve those by the initial termination date, but it didn’t happen. It is deeply disappointing. But we have reached a point where continued negotiation within the framework of the MTA is not going to resolve the outstanding issues.”

The partnership between Boeing and Embraer already received unconditional approval from all necessary regulatory authorities, except from the European Commission.

This deal was intended to compete the new Airbus/Bombardier partnership where Airbus recently acquired the C-Series/A220 program.

Full Press Release: https://boeing.mediaroom.com/2020-04-25-Boeing-Terminates-Agreement-to-Establish-Joint-Ventures-with-Embraer

Embraer now seeks damages against Boeing:https://www.flightglobal.com/aerospace/embraer-to-seek-damages-as-it-accuses-boeing-of-sabotaging-merger/

Not great for both companies as the proposed deal would’ve been able to help compete against its competitors. Embraer spent $120.8 million alone working on preparing for the new partnership.

28 Likes

Wow was looking forward for this. 😔

3 Likes

I was looking forward to it as well. Maybe it will happen when this is all over though…

2 Likes

More sad news from the aviation industry during this crazy time. To be honest I just hope Embraer survives through it all. I would hate for them to disappear completely, especially with the A220/C-Series taking so much market share away from E-jets already.

2 Likes

I think this is a good thing for Embraer. Being independent from such a big company that could potentially just drag them down will allow them to continue keeping their focus on regional jets, without the direct influence of other companies.

4 Likes

Unfortunate to hear even more bad news economically for the industry, hopefully Embraer can get out of all this.

I get your point and I hope this is true. But the E2 program has had far fewer orders than expected when the program was launched, so unless they come up with something great very soon, I’m not sure how else they will bring cash in. Delta was one of the airlines that was considering the E2, then went for 90+ A220s instead. That’s a big blow, and it’s just one example.

Anyway, huge Embraer fan here so I will always root for them.

1 Like

Yep the Delta deal was a blow. I aswell am a massive fan of the Embraer aircrafts!

1 Like

Oh thank god. I’m glad this didn’t happen, because then Boeing would almost completely own Embraer. This is probably a better outcome

1 Like

Embraer just spilled the tea. Interesting times ahead.

7 Likes

So instead of making a new partner, they created a new enemy.

Outstanding move

2 Likes

This is set to get exciting. Billions of dollars are at the center of this dispute and Boeing’s arguments don’t seem to be that reasonable after all. This is definitely a story to watch!

Very interesting indeed. Many different sides to the story. Due to the global pandemic, which has hammered the aerospace industries, Boeing feels that a $3.8bn acquisition is ill timed for its current state of affairs. With the MAX situation unfolding last year and now the pandemic, Boeing is stuck with the question of liquidity while aircraft remain on the ground. In addition, the price of the transaction has dramatically changed. Embraer stock has plummeted more than 66% in the last 12 months and is currently closer to $1.1bn. Boeing executives could very well feel that they are overpaying for the acquisition. Let’s also not forget the European anti-monopoly regulators decision, would have been August 7th now, into whether Boeing would maintain too much control and market power. Boeing felt that with all these circumstances why not pull out of the deal while final agreements on conditions had not been decided and forgo the $100M termination fee.

Strangely enough even politics have now entered the deal. Boeing is trying to receive federal money from the governments stimulus package. They can’t been seen as sending $4bn of federal money put into Brazil. Had the deal gone through, Boeing would undisputedly become the #1 airplane maker globally having eliminated the threat of its third place rival. Certainly a story to keep unfolding.

1 Like

im actually happy because then it not just two major aircraft manufacurers

1 Like

Here we go.

Brazil’s Embraer on Monday said it had begun an arbitration process against Boeing after the U.S. planemaker canceled a $4.2 billion deal over the weekend that its former partner saw as crucial to its long-term success.

2 Likes

Sounds like Embraer wants the money and to get out of the industry real quick! Too much competition.

But Brazil’s government, which used to own Embraer and is still the company’s largest military client, took a more upbeat tone. It eyed China as a potential new partner for the planemaker

Brazil’s Vice President Hamilton Mourao, a retired army general, called the turn of events a “blessing in disguise.”

First Bombardier, now this. Boeing is making enemies right, left and center.

China will never rescue Embraer. They simply have no reason to. Seems more likely the Brazilian government is just frustrated to be backed into a corner, without a plan B. Vice President Mourao is a strong practicing Roman Catholic who tends to align himself with conservative values. His boss, the President, and himself have praised the United States and Donald Trump for their foreign policy. This current administration is most likely the most pro-American that Brazil has ever seen. It would be a complete 180 degree spin to sell Brazils most comprehensive aerospace and defense conglomerate to a communist government. Brazil wouldn’t have the political maneuverability due to its Western allies as well.

In addition, Communist China has too much national pride to make the acquisition. China’s first commercial airliner, the Comac’s ARJ21, is essentially a complete failure. After almost two decades since development this technologically obsolete heavy “Soaring Phoenix” has an abysmal 24 produced aircraft. The Chinese would have to remarkably admit to failure having acquired the competing but more advanced Embraer E-175. From the Wenzhou train collision onto the mass Uyghurs imprisonment to the SARS outbreak and now the COVID-19 pandemic, I can say with great confidence that the PRC government will not allow a story of failure.

1 Like

image