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Brazil approves Boeing-Embraer tie-up with new commitment to keep local jobs

Reuters  |  SAO PAULO/BRASILIA 

By Rochabrun and Maria Carolina Marcello

SAO PAULO/BRASILIA (Reuters) - The on Thursday said it would allow a proposed tie-up between planemakers and to go forward, capping weeks of uncertainty in which expressed hesitation.

The approval maintains the terms of the deal as previously proposed, with Embraer selling 80 percent of its commercial plane division, its most profitable, for $4.2 billion to Boeing, which will have total control of the new venture.

But one thing was new: the government said in a press release that the two planemakers would "maintain the current jobs in Brazil," a move that might appease union workers and politicians who had raised concerns that, if the deal went through, Boeing would then try to slash jobs. The companies had previously been noncommittal on the issue.

The tie-up between Embraer and Boeing is seen as part of a reshaping of the global aviation market for mid-sized planes. It follows a similar deal by Boeing's rival which bought Bombardier Inc's commercial plane division that competed with Embraer.

The deal still must now be voted on by Embraer's private shareholders within the next 30 days, but winning the backing of was its biggest hurdle.

If approved by shareholders, the companies will then have to seek regulatory approval in several countries.

The deal also faces legal challenges in Workers and left-wing politicians obtained court orders blocking the deal in December, but the injunctions were quickly reversed. The tie-up could face future injunctions as the cases remain pending.

Minority shareholders have also filed legal complaints that have yet to be resolved.

Embraer and Boeing said in a statement they expect the deal to obtain final approvals before the end of 2019.

Boeing shares closed up 2.6 percent on Thursday and were flat in after-hours trade following the deal approval. Embraer shares on were up 0.4 percent after the close.

Shortly after assuming the presidency on Jan. 1, Bolsonaro, a former army captain, had expressed concern that Boeing might end up owning all of Embraer if the deal was approved under the terms proposed.

But on Thursday, a statement from his office said his government had analyzed the proposal and found that it "preserves (Brazil's) sovereignty and the national interests."

(Reporting by Rochabrun in Sao Paulo and Maria Carolina in Brasilia; Editing by and Lisa Shumaker)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Fri, January 11 2019. 04:09 IST
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