Boeing-Embraer Deal Collapses

Boein
BA
g has abandoned a deal to buy 80% of Embraer’s commercial aircraft business for $4.2 billion, stating Saturday morning that the Brazilian company didn’t satisfy necessary conditions of the agreement.

The deal, which was born out of the increasing dominance of Boeing and Airbus and the U.S. planemaker’s desire to fill out its product lineup with Embraer’s smaller jets and add engineering resources, was undercut by the sudden collapse of the aerospace industry amid the coronavirus pandemic. Boeing is under pressure to conserve cash and reduce production, with demand for new planes disappearing, and the agreed-upon price of $4.2 billion was looking increasingly rich with Embraer’s market value tumbling roughly 75% to $1.1 billion.

“$4 billion means much more to Boeing than it did back then,” said Richard Aboulafia, an aerospace analyst with Teal Group.

Boeing will pay a termination fee of $75 million.   

Under the terms of the deal, either party could back out after midnight Friday if it wasn’t closed by then.

Boeing and Embraer were also looking to establish a separate joint venture to market Embraer’s KC-390 military transport.

The two companies announced the tie-up in July 2018 after Embraer’s rival in the regional jet business, Bombardier, gave Airbus a 50.01% stake in the Canadian company’s C Series program after coming close to bankruptcy due to cost overruns and delays in developing the plane.