By Fabiola Moura, Samy Adghirni and Richard Clough / Bloomberg
Boeing is seeking control of Embraer as part of a deal that would include safeguards for the interests of the Brazilian Defense Ministry, people familiar with the matter said.
The U.S. planemaker is arguing that agreements it has made in Australia and the U.K. show that it can operate defense businesses without compromising military plans, said the people, who asked not to be named because the talks are private. The Brazilian government, which has the power to block an acquisition of Embraer and signaled opposition last month, has suggested it has some flexibility on the issue of control, the people said.
A working group with representatives from the companies and Brazil’s government is exploring defense protections that would still give Boeing full access to Embraer’s product lineup. Boeing would keep Embraer’s brand and Brazilian factories, the people said. Boeing would also use Embraer engineers to help develop a new midsized aircraft known within the U.S. manufacturer as the “new mid-market airplane.”
Boeing and Embraer are pushing for an agreement with the Brazilian government soon since there’s a risk that political opposition would mount ahead of the South American country’s presidential election in the second half of 2018, the people said. Boeing also wants to get Embraer engineers started on the new jetliner project as soon as possible, they said.
Embraer’s American depositary receipts climbed 4.2 percent to $26.29 at 1:31 p.m. in New York. They advanced as much as 5.4 percent after the Bloomberg News report on the latest developments in the talks. Boeing fell less than 1 percent to $295.92.
A deal would give Boeing an aircraft offering in the 100-seat category to counter a new threat from Airbus SE, which agreed in October to take control of Bombardier Inc.’s C Series program. The Canadian jet, which competes with Embraer’s largest commercial planes, is the target of a U.S. trade complaint brought by Boeing.
Boeing and Embraer declined to comment. Brazil’s Defense Ministry didn’t immediately return requests for comment.