Boeing Tries to Overcome Brazil's Resistance to Embraer Takeover
January 05 2018 - 1:20PM
Dow Jones News
By Dana Mattioli and Dana Cimilluca
Boeing Co. is in discussions with Embraer SA and the Brazilian
government on ways to address the government's concerns about the
U.S. planemaker's potential takeover of its Brazilian rival,
according to people familiar with the matter.
Boeing and Embraer had informally agreed to terms that would
value the Brazilian company at $28 a share, the people said.
But after The Wall Street Journal reported on the talks last
month, some Brazilian officials came out against a deal. President
Michel Temer said the government would welcome a new investment in
Embraer but wouldn't permit a change in control of the company. A
government spokesman said Friday that the country's position hasn't
changed.
The companies are now in discussions with the government about
ways to overcome that resistance, which centers largely on
Embraer's defense business. Boeing is sensitive to those concerns
and is proactively trying to address them, one of the people
said.
The American company is considering allowing the government to
maintain a golden share in the defense business, which it has in
the entire company now, the people said.
Via its golden share, the Brazilian government has veto power
over any transaction that would transfer control of Embraer, a
former state-owned entity considered a jewel of Brazilian industry
that still has close ties to the country's military
establishment.
As of Friday morning, Embraer's U.S. shares were trading at just
under $27, nearly 35% more than their price just before the
possible deal surfaced.
It's uncertain whether the two sides will find a mutually
agreeable arrangement. But if a deal were to be reached, it would
likely take between nine months and a year to close, one of the
people said.
Embraer, based in the city of São José dos Campos in the state
of São Paulo, is the world's third-largest commercial-jet
manufacturer by revenue and has some 18,000 employees. It's best
known for making regional jets in the 70- to 100-seat range, which
are heavily used on routes where demand doesn't warrant use of
larger Boeing or Airbus planes. Boeing is also willing to take
steps to protect Embraer's brand, management and jobs, people
familiar with the matter have said.
Boeing is the world's largest aerospace company with a market
value of about $180 billion. It makes commercial jetliners and
defense, space and security systems as well as military aircraft,
weapons, satellites and helicopters.
Buying Embraer would also increase Boeing's exposure to the
market for business jets, which has been under pressure from
sluggish sales since the financial crisis.
--Luciana Magalhaes contributed to this article.
Write to Dana Mattioli at dana.mattioli@wsj.com and Dana
Cimilluca at dana.cimilluca@wsj.com
(END) Dow Jones Newswires
January 05, 2018 13:05 ET (18:05 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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