Boeing stated it dropped plans to take control of the jetliner business of Brazil’s Embraer; saving around US$4 billion in much-needed cash, but adding further uncertainty to its own product strategy, reported the Wall Street Journal.
The US aerospace giant stated Saturday, April 25, that the companies failed to agree to final terms by the initial termination date and opted to walk away from the two planned joint ventures announced in 2018, which had already been delayed by some competition regulators.
Boeing had pursued Embraer to acquire access to smaller jetliners seating around 100 passengers and engineering expertise, but the Brazilian company’s market value has fallen by two-thirds since the start of the year as the coronavirus upended air travel and led to the grounding of much of the global airline fleet.
The companies didn’t detail what conditions weren’t met. Boeing doesn’t expect to have to pay a break fee—which varied from US$75 million to US$100 million in the original contract—according to people familiar with the situation.
“We all aimed to resolve those by the initial termination date, but it didn’t happen,” said Marc Allen, who headed Boeing’s team on Embraer integration.
Embraer claimed Boeing had wrongfully terminated the agreement and used false claims as a pretext to avoid its commitments to close the transaction. The Brazilian company stated that it intends to use all remedies available regarding the damages incurred by Embraer because of Boeing’s decision.
“We believe Boeing has engaged in a systematic pattern of delay and repeated violations of the [purchase agreement], because of its unwillingness to complete the transaction in light of its own financial condition and 737 MAX and other business and reputational problems.”
Boeing had agreed to pay US$4.2 billion in cash for an 80% stake in Embraer’s commercial business, which focuses on small regional jetliners, as well as a 49% stake in a unit producing a new military cargo jet. Boeing stated it still wanted to continue a joint marketing deal involving Embraer’s military cargo jet.
Full Content: Wall Street Journal
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