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Boeing has terminated its plans to partner with Embraer and the Brazilian manufacturer has hit back, saying it believes the move is not only wrong, but that the Chicago-based OEM has “manufactured false claims” to avoid closing the deal, valued at US$4.2 billion.
Boeing announced on April 25 that it was backing out of its Master Transaction Agreement (MTA) with Embraer, involving a joint venture whereby Boeing would have acquired 80 per cent of Embraer’s commercial jet business. The Brazilian manufacturer was to retain the remaining 20 per cent.
A second partnership to develop new markets for the C-390 Millennium (formerly the Embraer KC-390) medium airlift and air mobility aircraft was also underway.
The U.S. manufacturer said it had exercised its rights to terminate the deal “after Embraer did not satisfy the necessary conditions.”
“Boeing has worked diligently over more than two years to finalize its transaction with Embraer. Over the past several months, we had productive but ultimately unsuccessful negotiations about unsatisfied MTA conditions. We all aimed to resolve those by the initial termination date (April 24), but it didn’t happen,” said Marc Allen, president of Embraer Partnership & Group Operations. “It is deeply disappointing. But we have reached a point where continued negotiation within the framework of the MTA is not going to resolve the outstanding issues.”
The planned partnership between Boeing and Embraer had received unconditional approval from all necessary regulatory authorities, with the exception of the European Commission.
The deal was expected to be beneficial to both companies, enabling Boeing to fortify itself against Airbus and emerging competitors in China, Russia and Japan. Zacks Equity Research said in October 2019 that once the deal closed, “both companies will benefit from a broader operational scale, additional resources and a worldwide footprint that will enable them to win more contracts from varied airlines across the globe.”
Embraer released its own statement on April 25, saying it believes it is in full compliance with its obligations under the MTA.
“We believe Boeing has engaged in a systematic pattern of delay and repeated violations of the MTA, because of its unwillingness to complete the transaction in light of its own financial condition and 737 Max and other business and reputational problems,” said the Brazilian OEM.
Embraer said it will take action against Boeing for the damages incurred by the cancellation.
Moving forward, it plans to continue delivering products and services to its clients.
“Our history of over 50 years is lined with many victories but also some difficult moments. All of them were overcome. And that’s exactly what we are going to do again. Overcome these challenges with strength and determination,” reads the Embraer statement.
Boeing said its existing agreement with Embraer to support and market the C-390 Millennium military transport aircraft, originally signed in 2012 and expanded in 2016, will continue.
