Brazils Bolsonaro approves Boeing-Embraer tie-up

Postado Janeiro 13, 2019

The share price in Brazilian airplane manufacturer Embraer soared Friday as markets reacted favourably to the country's President Jair Bolsonaro approving a merger with USA giant Boeing.

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.

Just a few days ago, there were speculations regarding Bolsonaro's doubts about the joint venture, as there is a clause that would allow Boeing to transform the deal into a mere acquisition.

The proposed joint venture between Boeing and Brazil's domestic aerospace and defence supplier has received the approval of the country's government, the companies announced on 10 January. This JV will be 80%-owned by Boeing, for which the United States group will be paying $4.2-billion (reportedly some 10% higher than its original offer), and 20% by Embraer.

The government's approval comes after the two companies last month approved terms for the joint venture that will be made up of the commercial aircraft and services operations of Embraer.

A second joint venture between the companies would promote and develop new markets for the multimission medium airlift KC-390. In this association, the Brazilian company will have control and 51 percent of the capital. The next one is to have the agreement ratified by the Board of Directors of Embraer, then it will be the time to prepare the definitive documents of the transaction.

"The closing of the transaction will be subject to shareholder and regulatory approvals and customary closing conditions". The completion of the transaction is expected by the end of 2019, they said.

While it is a major step, Bolsonaro's approval is not safe from judicial challenges.