Boeing pulls out of $4.2 billion deal for Embraer as coronavirus roils the aviation industry
SAO PAULO / PARIS (Reuters) - Boeing Co (BA.N) said on Saturday that it has canceled a $ 4.2 billion deal to buy the commercial jet division of Embraer (EMBR3.SA), what the Brazilian planner said It was expected to be a transformative step.
Boeing's statement confirmed the Reuters story earlier on Saturday and followed a story on Friday in which Reuters reported that the deal was nearing collapse as the two sides exceeded a significant midnight deadline.
Boeing said in the statement that Embraer had failed to meet certain conditions to undergo the deal, although it was not specified which ones. The April 24 deadline for closure was breached in the deal since early last year, but conflicting hiccups forced both companies to try to find a new deadline.
Embraer declined to comment.
In July 2018, Boeing agreed to challenge Airbus to buy 80% of Airbus's commercial unit in the direct market for up to 150 seats of PlayDes aircraft.
At that time Embraer aggressively defended the sale, saying it was crucial to the company's survival in the future.
The A220 has already proved a sales success for Airbus. And when the epidemic spreads and the airline world starts flying with smaller passenger loads, smaller jets may become even more attractive to airlines.
Now Boeing has lost its planned competition line-up in that category, leaving Airbus at an advantage.
The Embraer deal was originally expected to close by this spring, but delayed regulatory approvals pending by the European Union. This delay was not possible at one time, to prevent expansion and a large outlay of cash.
As per the terms of the agreement reached by both parties in January 2019, Boeing will have to pay the Embraer a $ 100 million termination fee to meet all the conditions of termination.
However, Boeing spokesman Alison Bone said on Saturday that with the lack of a final agreement on those terms, "we do not believe that a termination fee applies in the circumstances."
“Given the current economic reality of the global aviation market, it can be seen that the operation with Boeing is not just beneficial to Embraer, it is fundamental to the survival of the company,” lawyers for Embraer said last year in response to a legal challenge.
Embraer had also gone to great lengths to set aside its commercial jet business to prepare for Boeing's takeover. At the beginning of the year, it paid all its employees two weeks to handle the cause-out.
SAO PAULO / PARIS (Reuters) - Boeing Co (BA.N) said on Saturday that it has canceled a $ 4.2 billion deal to buy the commercial jet division of Embraer (EMBR3.SA), what the Brazilian planner said It was expected to be a transformative step.
Boeing's statement confirmed the Reuters story earlier on Saturday and followed a story on Friday in which Reuters reported that the deal was nearing collapse as the two sides exceeded a significant midnight deadline.
Boeing said in the statement that Embraer had failed to meet certain conditions to undergo the deal, although it was not specified which ones. The April 24 deadline for closure was breached in the deal since early last year, but conflicting hiccups forced both companies to try to find a new deadline.
Embraer declined to comment.
In July 2018, Boeing agreed to challenge Airbus to buy 80% of Airbus's commercial unit in the direct market for up to 150 seats of PlayDes aircraft.
At that time Embraer aggressively defended the sale, saying it was crucial to the company's survival in the future.
The A220 has already proved a sales success for Airbus. And when the epidemic spreads and the airline world starts flying with smaller passenger loads, smaller jets may become even more attractive to airlines.
Now Boeing has lost its planned competition line-up in that category, leaving Airbus at an advantage.
The Embraer deal was originally expected to close by this spring, but delayed regulatory approvals pending by the European Union. This delay was not possible at one time, to prevent expansion and a large outlay of cash.
As per the terms of the agreement reached by both parties in January 2019, Boeing will have to pay the Embraer a $ 100 million termination fee to meet all the conditions of termination.
However, Boeing spokesman Alison Bone said on Saturday that with the lack of a final agreement on those terms, "we do not believe that a termination fee applies in the circumstances."
“Given the current economic reality of the global aviation market, it can be seen that the operation with Boeing is not just beneficial to Embraer, it is fundamental to the survival of the company,” lawyers for Embraer said last year in response to a legal challenge.
Embraer had also gone to great lengths to set aside its commercial jet business to prepare for Boeing's takeover. At the beginning of the year, it paid all its employees two weeks to handle the cause-out.
