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28 Jan 2019, Stella Zlatareva, EMIS M&A Team

Boeing meets Brazilian resistance in hopes for upper hand in the lucrative passenger aviation market

Having cleared its biggest hurdle, the approval of Brazil’s new government, the USD 4.2bn deal between plane maker Embraer and US counterpart Boeing seems more likely than ever. The joint venture, which would effectively give the US giant control over the commercial aircraft and services unit of Embraer, took months to devise but finally, in December 2018, the parties put the finishing touches. Under the agreement, Boeing will hold an 80% stake in the commercial aircraft business, leaving Embraer with the remaining 20%.

The agreement comes in light of a similar takeover by Europe’s Airbus, which a year prior took Canadian Bombardier’s commercial plane division. The latter is among the main competitors of Embraer. The takeover of Embraer’s division would allow Boeing to directly vie with the French major in the regional jet market.

The government could have vetoed the venture through its golden share despite Embraer being a public company listed in Brazil. However, an injunction delivered by a federal court in December 2018 was later reversed as it “would hurt the economy”. The legal challenge was also political – the injunction was submitted by trade union-backed lawmakers from the Workers’ party. Labour unions vocally opposed the deal for Embraer’s commercial jet operations. And unsurprisingly so, given the company’s profound ties to the Brazilian defence industry and the fact that it is considered of strategic importance to the nation.

One thing is clear, the recent M&A moves in aviation represent a major shake-up in the international aerospace industry and mark the beginning of a clash for control of the passenger jet market.

Find more about this deal on EMIS DealWatch Original source: EMIS - DealWatch

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