Embraer-Boeing merger delayed by European Commission
The European Commission suspended its investigation into the takeover of Embraer by Boeing, saying it did not receive sufficient information from both parties. As a consequence, the final decision of the regulator should be postponed to March 2020.
The probe was opened on October 4, 2019. The European Commission is concerned that the acquisition of 80% of Embraer by Boeing for $4.75 billion dollars would deprive the commercial aircraft industry of its third-biggest manufacturer, in a market already highly concentrated, especially in the single-aisle market segment. “Potential entrants from China, Japan and Russia seem to face high barriers to entry and expansion and may be unable to replicate within the next five or even ten years the competitive constraint currently exerted by Embraer,” outlined the Commission in a statement, fearing that less competition may lead to higher prices.
But the investigation has since been halted, allegedly due to a lack of information from Embraer and Boeing. “The Commission has stopped the clock in its in-depth investigation into the proposed acquisition by Boeing and Embraer,” a Commission spokesperson told AeroTime, adding that “this procedure in merger investigations is activated if the parties fail to provide, in a timely fashion, important information that the Commission has requested from them”.
The Commission originally planned to give its decision by February 20, 2020, but it could now be postponed to March. Before the European Commission began an in-depth probe, Embraer and Boeing had expected to obtain regulatory approvals and the satisfaction of other customary closing conditions by the end of 2019.
Since 2018, Boeing has been trying to acquire an 80% stake in Embraer commercial aviation activities, including aftermarket support services, for $4.2 billion. The new company, renamed Boeing Brasil, should be led by a Brazilian-based management team with a president and CEO. Boeing would have “operational control and management”.
The proposed deal sparked some controversy in Brazil. In December 2018, Judge Victorio Giuizio Neto of the Brazilian federal court blocked the project twice, before his injunctions were overturned. On January 10, 2019, the deal received approval from the newly elected Brazilian president Jair Bolsonaro. Throughout his campaign, the then-candidate defended the project to protect Embraer against rivaling Airbus-Bombardier alliance.
As for Embraer’s military division, the two manufacturers have also agreed on a second joint venture in which the Brazilian company should hold a 51% and Boeing the remaining 49%. This other company should continue developing the KC-390 tactical transport and inflight refueling aircraft.
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