Em­braer-Boei­ng avi­a­ti­on deal block­ed by Bra­zi­li­an court

Times of Suriname - - ENGELS -

BRAZIL - A Bra­zi­li­an fe­deral court on Thurs­day gran­ted an in­junc­ti­on bloc­king the pro­po­sed tie-up bet­ween U.S. plane­ma­ker Boei­ng Co and Em­braer SA, a deal the Bra­zi­li­an com­pa­ny says is cru­ci­al to its sur­vi­val. Em­braer sha­res in Sao Pau­lo clo­sed 2.42 per­cent lo­wer, alt­hough it remai­ned too ear­ly to say whe­ther the in­junc­ti­on will ac­tu­al­ly block or sig­ni­fi­cantly af­fect the deal. La­bor groups in Brazil of­ten bring court chal­len­ges against sig­ni­fi­cant bu­si­ness deals and the in­junc­ti­on could be re­ver­sed. The de­ci­si­on for­bids Em­braer’s board of di­rec­tors from sig­ning the deal to cre­a­te a joint ven­tu­re on com­mer­ci­al avi­a­ti­on that Boei­ng would con­trol. Boei­ng de­cli­ned to com­ment and Em­braer did not im­me­di­a­te­ly re­ply to a re­quest for com­ment. The legal ac­ti­on was brought by four con­gress­men with Brazil’s leftwing Wor­kers Par­ty. The com­pa­nies an­noun­ced in Ju­ly that Em­braer would sell 80 per­cent of its com­mer­ci­al avi­a­ti­on bu­si­ness to Boei­ng in a deal valu­ing that seg­ment at $4.75 bil­li­on. Em­braer, among the world’s lar­gest ma­kers of mid-si­zed pla­nes of up to 150 pas­sen­gers, used to com­pe­te in that seg­ment with Ca­na­da’s Bom­bar­dier Inc. The deal has stal­led part­ly be­cau­se the Bra­zi­li­an govern­ment, which has ve­to po­wer at the plane­ma­ker, has been re­luct­ant to gi­ve it a green light. On­ly then could the com­pa­ny call a sha­re­hol­ders’ mee­ting to ap­pro­ve it. In his de­ci­si­on, ju­d­ge Vic­to­rio Gi­ui­zio Ne­to cast doubt that the pro­po­sed deal would be good for Em­braer’s bottom li­ne. “The rea­son is very sim­ple, Boei­ng is not gi­ving up any­thing” in this trans­ac­ti­on, he wro­te. The de­ci­si­on says Em­braer would gi­ve up its pro­fi­ta­ble com­mer­ci­al di­vi­si­on.

He ad­ded that the new com­pa­ny would th­re­a­ten the rights of the Bra­zi­li­an govern­ment be­cau­se it would re­strict its con­trol over Em­braer to the part of the com­pa­ny that will not be sold to Boei­ng. Bom­bar­dier spun off its mid­s­i­zed com­mer­ci­al jet di­vi­si­on ear­lier this year af­ter sel­ling a con­trol­ling sta­ke to Boei­ng ri­val Air­bus.

The deal bet­ween Boei­ng and Em­braer is wi­de­ly seen as a re­ac­ti­on to an ear­lier deal bet­ween that joint ven­tu­re. Boei­ng and Air­bus his­to­ri­cally ha­ve pro­du­ced lar­ger air­craft than Em­braer and Bom­bar­dier. But the mid­s­i­zed seg­ment is ex­pec­ted to grow sub­stan­ti­al­ly, which would gi­ve Air­bus a sig­ni­fi­cant ad­van­ta­ge over Boei­ng un­less the U.S. plane­ma­ker al­so ex­pands in­to that mar­ket. Brazil Pre­si­dent Mi­chel Te­mer said he would le­a­ve the de­ci­si­on to the fu­tu­re ad­mi­ni­stra­ti­on, which ta­kes of­fi­ce Jan. 1. Pre­si­dent­elect Jair Bol­so­na­ro has said he is in fa­vor of the deal.

(Reu­ters)

Em­braer SA claims that a deal with Boei­ng Co is cru­ci­al to its sur­vi­val. (Pho­to: Exa­me)

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