Embraer Soars in Sao Paulo as Bolsonaro Approves Boeing Deal

Lloyd Doyle
January 13, 2019

The share price in Brazilian airplane manufacturer Embraer soared today as markets reacted favourably to the country's President Jair Bolsonaro approving a merger with us giant Boeing.

Under the terms of the agreement announced a month ago, a new company will be formed to take care of the development and production of Embraer commercial aircraft. In this regard, the government will not interfere with the transaction.

Both companies "welcomed" the approval in a joint declaration, stating: "The strategic partnership between Embraer and Boeing will enable both companies to accelerate growth in global aerospace markets". The deal must still be approved by shareholders. Closing of the transaction is expected by the end of this year. In December, both detailed plans to purchase 80 percent of Embraer's commercial jetliner by Boeing and the creation of a second joint venture to produce and sell the KC-390 military transport jet.

The terms of the partnership companies agreed in December past year.

Shortly after assuming the presidency on January 1, Bolsonaro, a former army captain, had expressed concern that Boeing might end up owning all of Embraer if the deal was approved under the terms proposed. The goal of the KC-390 JV would be to help capture global market share in a competitive worldwide market; gain access both to the U.S. market and to U.S. sales channels (such as the Foreign Military Sales and Foreign Military Financing programmes); maintain the capabilities of the Brazilian defence industry; consolidate the financial results and governance of Embraer; and provide more competitive solutions to customers.

BTG Pactual reiterated its buy rating for Embraer's American depositary receipts after the Brazilian government's decision.

Other reports by Iphone Fresh

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