Boeing backs out of Embraer merger - washingtonpost.com
Boeing has terminated a long-planned $4.2 billion deal with the Brazilian aerospace manufacturer Embraer after negotiations broke down shortly before a Friday night deadline, the company announced Saturday.
The move comes as a global air travel shutdown caused by the coronavirus pandemic has left Boeing’s commercial aircraft division grasping for cash. And it shows how the economic crisis already is having long-term effects on the company’s global competitiveness.
“Over the past several months, we had productive but ultimately unsuccessful negotiations about unsatisfied [Master Transaction Agreement] conditions. We all aimed to resolve those by the initial termination date, but it didn’t happen,” Marc Allen, Boeing’s president of Embraer partnership and group operations, said in a news release.
“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,” Allen said.
Embraer denied that it had violated the terms of the agreement and accused Boeing of lying to cover up its true motivations for dropping out of the deal. In a statement emailed to reporters it foreshadowed possible legal action, vowing to “pursue all remedies against Boeing” for what it called a wrongful termination of the agreement.
“Embraer believes strongly that Boeing has wrongfully terminated the MTA, that it has manufactured false claims as a pretext to seek to avoid its commitments to close the transaction and pay Embraer the US$4.2 billion purchase price,” the statement reads. “We believe Boeing has engaged in a systematic pattern of delay and repeated violations of the MTA, because of its unwillingness to complete the transaction in light of its own financial condition and 737 MAX and other business and reputational problems.“
The move by Boeing puts an end to years of careful negotiations and regulatory approvals in both countries. The deal would have given Boeing an 80 percent controlling stake in Embraer and allowed it to take control of the company’s prized narrow-body commercial jetliners.
The deal was announced in 2018 at a time when Boeing’s aerospace business was reaching historic financial peaks. The Embraer deal was an aggressive move to build out its commercial aircraft portfolio to compete with Airbus. Embraer competes directly with Bombardier, a Canadian jet manufacturer that merged with Airbus in 2017.
But 2019 and 2020 have brought a historic collapse in Boeing’s commercial aviation business that few could have foreseen. Last year the company was forced to stop selling the 737 Max, its best-selling commercial jet, when flawed flight control systems were linked to two deadly plane crashes that killed hundreds of people.
More recently the shutdown in global air traffic caused by the coronavirus has thrown Boeing’s customers into a state of disarray, leading several airlines and aircraft leasing companies to cancel orders. Most recently the aircraft leasing company Avalon canceled an order of 737 Max jets worth $8.4 billion. Analysts say more cancellations could soon follow. |
