A Brazilian federal judge has once again tossed the pending Boeing-Embraer joint-venture into doubt, issuing a second injunction to block the government there from authorizing the sale of Embraer’s commercial aircraft division to the U.S. OEM. Judge Victor Giuizo Neto earlier reached a similar conclusion — that the proposed sale does not return fair value to Embraer shareholders — but that ruling was overturned on the company’s appeal to free-enterprise principles.
Embraer is expected to appeal the new ruling, too. Boeing has declined to comment on the new development.
Earlier this week Boeing and Embraer announced the final terms of their joint-venture plan, which will form a $5.26-billion company controlled by Boeing (80%) but operating in Brazil, producing aircraft for the commercial aircraft “mid-market,” meaning for 70-150 passengers. Presently, this includes the Embraer E-Series and newer E-Jet E2 twin-engine narrow-body jets. Strategically, for Boeing, the addition of Embraer would counter rival Airbus’ consolidation of the Bombardier C-Series medium-range product line.
Embraer is a private company with the Brazilian government holding a minority stake. However, that holding is described as "the golden share" because it allows the government to control any change in the firm’s ownership.
“The brutal asymmetry in the shareholder structure of this venture prevents it from being carried out without compromising the survival of national interests,” according to Judge Giuizo Neto.
The Embraer sale continues to face political opposition in Brazil from labor groups and leftist parties, as well as from shareholder activists who object to the ownership change.