- Boeing Co (NYSE: BA) announced it is canceling a $4.2 billion deal for buying the commercial jets unit of Brazil-based Embraer
Today Boeing Co (NYSE: BA) announced it is canceling a $4.2 billion deal for buying the commercial jets unit of Brazil-based Embraer. This means that Boeing will not gain a larger stake in the market for smaller jets. And in a press release, Embraer responded by saying it will pursue remedies against Boeing for the alleged damages incurred.
“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. 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,” added Embraer in the press release.
The two parties were planning to create a joint venture comprising of Embraer’s commercial aviation business and a second joint venture for developing new markets for the C-390 Millennium medium airlift and air mobility aircraft.
Boeing said it exercised its rights to terminate after Embraer “did not satisfy the necessary conditions” as part of the April 24 initial termination date.
“Boeing has worked diligently over more than two years to finalize its transaction with Embraer. Over the past several months, we had productive but ultimately unsuccessful negotiations about unsatisfied MTA conditions. We all aimed to resolve those by the initial termination date, but it didn’t happen,” explained Marc Allen, president of Embraer Partnership & Group Operations. “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.”
On Monday, Boeing is going to host an annual meeting virtually. During the annual meeting, the company will likely address how it is dealing with the March 2019 grounding of the 737 MAX and how it is managing the COVID-19 pandemic — which has been potentially causing a drop in new plane orders.
Featured photo credit: Boeing
Disclosure: I own a small number of Boeing shares
