US aerospace giant Boeing and Brazil's Embraer are close to an agreement to combine their commercial air operations into a new company, a person familiar with the talks told AFP Tuesday. The deal is designed to address the main roadblock to a merger between the two aerospace companies: Brazilian government opposition.
Boeing would hold 80 to 90 percent of the new company, which would be based in Chicago, while Embraer's military operations would not be affected by the transaction and would remain under Brazilian control, the source said. The companies in December confirmed they were in talks on a possible combination, a move seen as part of Boeing's strategy to counter archrival Airbus' ambitions in the smaller commercial aircraft category with a venture with Canadian company Bombardier.
However, the talk of a merger drew immediate objections from the government in Brazil, which holds a so-called golden share with veto power over Embraer transactions. Boeing presented this structure to the government, and the discussions "are moving in the right direction," the source said, noting the announcement of an agreement could be made in the coming weeks.
Brazil's Defense Ministry has referred to government control of Embraer as "a matter of national sovereignty." According to a report in Brazilian daily Valor Economico, the government would retain the "golden share" in Embraer.
Boeing declined to comment on the reports, but chief Dennis Muilenburg told investors last week that the combination with Embraer would be "a great strategic fit," and that the company was working to address the Brazilian government's concerns.