Boeing Cancels Agreement to Buy Embraer


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https://www.cnbc.com/2020/04/25/boeing-terminates-joint-venture-agreement-with-brazils-embraer.html

Boeing ends talks for $4 billion tie-up with Brazil’s Embraer

Boeing has ended more than two years of tie-up talks for a $4.2 billion commercial jet deal with Brazil’s Embraer, the latest derailment at the aerospace giant.

“It is deeply disappointing. But we have reached a point where continued negotiation within the framework of the [merger transaction agreement] is not going to resolve the outstanding issues,” said Marc Allen, president of the Embraer Partnership and Group Operations, in a Boeing news release.

 

Boeing said Embraer did not satisfy conditions under the agreement, which expired late Friday but the Chicago-based company declined to go into specifics. Embraer did not immediately respond to a request for comment.

The deal, which would have given Boeing control over Embraer’s commercial jet arm, was meant to help Boeing grow even stronger in commercial aerospace to better compete with European rival Airbus. Airbus, for its part, has already taken a stake in what’s now called the A220 passenger-plane program of Canada’s Bombardier.

The collapse of the Boeing-Embraer deal comes as the aerospace industry is in crisis because of the coronavirus. Thousands of jets around the world are grounded as air travel demand has dried up in the pandemic and shelter-in-place orders that aim to stop it from spreading. The crisis has put airlines on shaky financial footing that’s destroying demand for new jets and accelerating retirements of older planes

“When nobody is flying and jets are on the ground it’s hard to hard ascribe winners and losers” in the collapse of the deal, said Richard Aboulafia, vice president of analysis at Teal Group.

Boeing announced the terms of the deal in July 2018, which would have given Boeing control of Embraer’s commercial aerospace arm, which makes passenger planes that are smaller than Boeing’s.

 

Much has changed for Boeing since the talks were first disclosed in late 2017. Two of its 737 Max planes, its best-seller, crashed, one in Indonesia in October 2018 and another in Ethiopia in 2019, killing all 346 people on both flights. 

Those jets have been grounded since March 2019 and cancellations are piling up, promising a painful year for the Chicago-based company.

Boeing is expected to provide more detail about the deal and further plans to cut costs when it reports first-quarter results before the market opens on Wednesday.

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