ERJ Embraer SA

By Doug Cameron 

Boeing Co. said Saturday it had dropped plans to take control of the jetliner business of Brazil's Embraer SA, saving around $4 billion in much-needed cash but adding further uncertainty to its own product strategy.

The U.S. aerospace giant said the companies failed to agree to final terms by the initial termination date and opted to walk away from the two planned joint ventures announced in 2018, which had already been delayed by some competition regulators.

Boeing had pursued Embraer to acquire access to smaller jetliners seating around 100 passengers and engineering expertise, but the Brazilian company's market value has fallen by two-thirds since the start of the year as the coronavirus upended air travel and led to the grounding of much of the global airline fleet.

The companies didn't detail what conditions weren't met. Boeing doesn't expect to have to pay a break fee -- which varied from $75 million to $100 million in the original contract -- according to people familiar with the situation.

"We all aimed to resolve those by the initial termination date, but it didn't happen," said Marc Allen, who headed Boeing's team on Embraer integration.

Embraer didn't immediately respond to a request for comment.

Boeing had agreed to pay $4.2 billion in cash for an 80% stake in Embraer's commercial business, which focused on small regional jetliners, as well as a 49% stake in a unit producing a new military cargo jet. Boeing said it planned to proceed with the defense deal.

The U.S. company last year raised funds for a deal it had hoped to close by the end of 2019, only for European antitrust regulators to voice objections. Their probe wasn't due to conclude until August.

Boeing had redirected the funds from last year's bond issue and has been raising more funding to address the liquidity squeeze from the grounding of the 737 MAX and the collapse in air travel, which has left airlines unable or unwilling to take new aircraft.

Rival Airbus SE moved into the small jetliner business by acquiring an aircraft program from Canada's Bombardier Inc.

Boeing's aircraft development program had already been derailed by the prolonged grounding of the MAX, following two fatal accidents. Boeing also shelved plans for a new midsize jet to focus on returning the MAX to commercial service.

Write to Doug Cameron at doug.cameron@wsj.com

(END) Dow Jones Newswires

April 25, 2020 11:49 ET (15:49 GMT)

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