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Boeing proposes Embraer tie-up excluding defense unit

Boeing proposes Embraer tie-up excluding defense unit

Boeing proposes Embraer tie-up excluding defense unit
February 02
21:43 2018
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Crew members cover windows of Embraer E190-E2 during the 52nd International Paris Air Show at the Le Bourget Airport near Paris, France on June 20, 2017.

Mustafa Yalcin | Anadolu Agency | Getty Images

Crew members cover windows of Embraer E190-E2 during the 52nd International Paris Air Show at the Le Bourget Airport near Paris, France on June 20, 2017.

Boeing has sought the Brazilian government’s approval of a partnership with planemaker Embraer that would create a new company focused on commercial aviation, a person familiar with the matter said on Friday.

The new vehicle would not include Embraer’s defense unit under the proposal presented on Thursday, according to the source, who asked not to be named due to the sensitivity of ongoing talks.

A Boeing representative in Brazil said the structure of a possible deal with Embraer was “still being studied.”

Embraer shares, which surged as much as 9 percent after Globo media group first reported on the creation of a third company on Thursday, pared gains to around 5 percent in afternoon trading. Boeing shares were down about 1 percent.

Representatives for Embraer and Brazil’s Defense Ministry, which set up a committee to make recommendations to the government on a partnership, declined to comment immediately.

Boeing’s proposed tie-up with Embraer, the world’s third-largest planemaker, would give it a leading share of the 70- to 130-seat market and create stiffer competition for the CSeries program designed by Canada’s Bombardier and backed by European rival Airbus last year.

An unexpected U.S. trade ruling last month scrapping tariffs on CSeries jets added to pressure on Boeing and Embraer to pull off a tie-up.

Brazil’s government has openly pushed for a partnership between the two companies focused more narrowly on commercial aviation, rather than an outright acquisition, due to concerns about the independence of Brazilian defense programs.

The government, which holds about 10 percent of Embraer shares through public-sector funds, still has veto power over Embraer’s military programs and any takeover attempts due to a golden share in the former state enterprise.

Boeing has sought ways to preserve the government’s golden share in Embraer and previously proposed safeguards for defense programs in Brazil along the lines of its partnerships in Britain and Australia, sources have told Reuters.



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