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Boeing Quits $4.2B Embraer JV Plan

April 26, 2020
A two-year effort to set up joint-venture businesses for mid-market jets and medium-lift transport aircraft was terminated because Embraer did not satisfy necessary conditions, Boeing said.

Boeing Co. unexpectedly terminated its agreement with Embraer S.A., under which the two companies planned to form a joint-venture to produce 70- to 150-seat narrow-body jets for the commercial aviation "mid-market," meaning high-volume commuter and regional routes. A second joint-venture would have promoted the Embraer C-390 Millennium medium-lift transport aircraft.

The two firms had a Master Transaction Agreement that set April 24, 2020, as the initial termination date. In calling off their planned ventures, Boeing said it exercised its rights to terminate after Embraer did not satisfy the necessary conditions of that MTA.

Under $4.2-billion plan unveiled late in 2017 and set in motion with the MTA in July 2018, Boeing was due to acquire Brazil-based Embraer's commercial aircraft business and control 80% of a new company, Boeing Brasil-Commercial. Embraer was to hold the remaining 20%.

The second JV, Boeing Embraer-Defense would have seen Boeing hold 49% and Embraer 51%.

"Boeing has worked diligently over more than two years to finalize its transaction with Embraer," according to a statement by Marc Allen, president of Embraer Partnership & Group Operations. "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, but it didn't happen."

He continued: "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 joint venture had been endorsed by directors of Boeing and Embraer, and approved by regulators in the U.S. and Brazil.

The European Commission resumed its evaluation of the joint ventures in the past week, after a delay of several months, setting a decision date for August 7.

When the partners struck their MTA in 2018 they set late 2019 for completing the two ventures, but the intervening period has seen Boeing become embroiled in the 737 MAX program idling and redesign effort, and the commercial aircraft industry sunk into an economic crisis due to the COVID-19 pandemic.

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