Sat, Dec 08, 2018 - Page 10 News List

Brazilian court delays Boeing-Embraer tie-up

AFP, SAO PAULO, Brazil

A Brazilian federal court on Thursday suspended a proposed US$4.75 billion tie-up between US aerospace giant Boeing Co and the civilian business of Brazilian airplane maker Embraer SA pending the government of Brazilian president-elect Jair Bolsonaro taking office.

The Sao Paulo court said that it was taking action to avoid “possible concrete acts” being taken on the aviation deal before the new administration comes in under Bolsonaro, who takes over on Jan. 1.

The court added that it was suspending “any concrete effect” of the Embraer board’s decision over transferring commercial operations to Boeing.

Boeing and Embraer announced the deal in July. Under the terms, Boeing was to hold an 80 percent stake in the Brazilian company’s commercial business, thus allowing Boeing to offer airplanes with capacity of up to 150 seats — a market in which it currently does not operate.

Embraer’s military aircraft business was excluded to overcome Brazilian government opposition to giving up a national champion to a foreign entity.

The agreement was seen as a response to a similar strategic partnership announced in October last year between Boeing’s European archrival Airbus SE and Canada’s Bombardier Inc.

The US firm would have operational and management control over the new venture, which is to be led by a Brazil-based chief who would report to Boeing CEO Dennis Muilenburg, the companies said in July.

The companies are creating another joint venture to promote their defense products and services, especially Embraer’s KC-390, a military transport aircraft.

Embraer, the third-largest aircraft manufacturer in the world, was founded as a state group in 1969 before being privatized in 1994, although the Brazilian government retains the right to make strategic decisions for the company.

The deal, which Embraer had said it expected to be finalized by the end of next year, was struck under outgoing Brazilian President Michel Temer.

Thursday’s ruling effectively prevents Temer’s government from seeing through the Boeing-Embraer deal in its final days before Bolsonaro’s team takes over.

Bolsonaro, a far-right politician, had a long record as a nationalist and protectionist when it came to Brazil’s economy. However, he changed tack to win over voters and investors in the run-up to his election last month by advocating privatization.

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