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Boeing seeks to save Brazil’s concerns about Embraer’s approach



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BRASILIA / PARIS (Reuters) – Boeing Co ( BA.N ) sought to allay Brazil's concern about a possible agreement with Embraer SA ( EMBR3.SA ) after President Michel Temer and other officials warned that they would veto any takeover bid for the regional aircraft manufacturer.

While Temer said he would receive an injection of foreign capital into Embraer, his warning was the last reminder that the company, which also manufactures military aircraft and was one of the most successful products of Brazilian industrial policy, remains a focus of attention. National pride

Boeing said that discussions with Embraer about what the companies have called a "potential combination" were ongoing and insisted that he fully respected the need to safeguard the defense of the company and other state liaisons.

"As we noted, the discussions are ongoing, but we have always had a deep respect for the role of the Brazilian Government, as well as its important defense and security concerns," said Boeing spokesman Phil Musser.

Earlier, Temer told a news conference that he would study any decision made by the companies of an alliance, emphasizing that his government could use its "golden part". in the company to block foreign control of the state company, totally privatized in 2006.

"When a decision comes, I will examine it," said Temer. He added: "The objective of the gold share is for the government to make such a decision."

Defense Minister Raul Jungmann said the government welcomed a commercial alliance with Boeing.

"We are in favor of this and other associations," Jungmann said at the same press conference with Temer.

But he also said that the company's foreign control was out of the question, citing Embraer's central role in Brazil's defense industry.

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"The moment Embraer's control passes to a company from another country, it will control the strategic decisions" for Brazil, Jungmann said. "No country would give up control of that." He mentioned that Gripen Embraer fighter jets will build with Saab AB of Sweden ( SAABb.ST ) and the KC-390 cargo jet project with which Embraer plans to dominate the military transport market for a long time dominated by the battle horse Hercules C-130 made in the United States.

Boeing and Embraer signed an agreement last year according to which the aircraft manufacturer of EE. UU It will help market the new military cargo plane, but it will also provide maintenance services once they are sold.

The government's opposition to a full sale does not prevent more specific treatment, according to a source familiar with the matter.

"If the government persists with its objections, a structure that could be proposed is for the government to maintain control of its defense business, and for Embraer to sell its commercial business to Boeing," the source said. "The agreement is strategically important for Boeing because it will complete its commercial line with regional aircraft."

Some type of commercial jet joint venture between the two aircraft manufacturers would make "a lot of sense", Teal Group analyst Richard Aboulafia. He said. "Even some kind of military joint venture as military transport would make sense, but an acquisition of Embraer makes no sense."

Embraer shares, which shot up 20 percent on Thursday, fell 1.4 percent on Friday. Boeing shares rose 0.24 percent.

It would be more difficult to quantify the earnings for shareholders of a more limited joint venture agreement than with a direct acquisition, said Cowen analyst Cai von Rumohr.

"I honestly believe that Boeing knew from the beginning that it would be a joint venture or a partnership," he said. "But as with Airbus-Bombardier, you can still set something in that line that clearly is beneficial for everyone."

The Boeing-Embraer talks arrive only two months after Airbus SE ( AIR.PA ]) reached an agreement to buy a majority stake in Bombardier Inc ( BBDb.TO ]) CSeries jetliner program.

Potential earnings for Embraer would include Boeing's biggest influence on sales of major airlines, as well as the service of existing aircraft and possible savings with suppliers, he said.

Report of Anthony Boadle and Ricardo Brito; Additional reporting by Greg Roumeliotis and Christian Plumb; Nick Zieminski's edition

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