It seems that Boeing has chosen to walk away from Embraer and the planned joint venture agreement.
The Chicago based company terminated its Master Transaction Agreement (MTA) with Embraer, under which the two companies sought to establish a new level of strategic partnership. The parties had planned to create a joint venture comprising Embraer’s commercial aviation business and a second joint venture to develop new markets for the C-390 Millennium medium airlift and air mobility aircraft.
This was of course after Airbus started investing in Bombardier and its CSeries product (before buying out majority ownership of the project).
The Master Transaction Agreement was due to run until 24th April 2020, subject to extension by either party if certain conditions were met.
However, it seems Boeing wasn’t happy and has exercised its rights to terminate after it believed Embraer did not satisfy the necessary conditions.
Marc Allen, president of Embraer Partnership & Group Operations said
“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,”
“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.”
Embraer is of course, not happy, with the company believing 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.
In addition, Embraer believes 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 company believes it is in full compliance with its obligations under the MTA and that it has satisfied all conditions required to be accomplished by April 24, 2020.
And as a final sign of unhappiness, Embraer will pursue all remedies against Boeing for the damages incurred by Embraer as a result of Boeing’s wrongful termination and violation of the MTA.
In terms of authorities, Boeing and Embraer had received unconditional approval from all necessary regulatory authorities apart from the European Commission.
This is probably not the expected result from this planned merger… but it is what it is. Where Airbus has successfully subsumed the C Series programme (and got a very nice jet out of it), Boeing and Embraer have nothing, bar an agreement to sell and support the Embraer C-390 military transport.
And it seems Boeing is running away from the agreement, leaving Embraer jilted at the altar.
Certainly, the language of the two press releases seems like one is being defensive, whilst the other is annoyed.
With Embraer threatening to take action for damages against Boeing, this has the makings of something that’s going to run and run…
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