Brazilian President Michel Temer said on Friday that he opposed Boeing Co
Temer told a news conference he would study any decision the companies take on an alliance when it arrives at his desk, emphasizing that his government could use its `golden share` in the company to block foreign control. Brazil`s government holds veto power over strategic moves at the planemaker, a formerly state-run company fully privatised in 2006.
Boeing and Embraer said on Thursday they are discussing a "potential combination" in a move that could consolidate a global passenger jet duopoly, provided Brazil`s government gives its blessing.
"When a decision arrives, I will examine it," Temer said. He added: "The purpose of the golden share is for the government to take such a decision."
Defence Minister Raul Jungmann said the government welcomed a commercial alliance with Boeing.
"We are in favour of this and other partnerships," Jungmann said at the same news conference with Temer.
But because Embraer plays such a central role in Brazil`s defence industry and sits at the heart of a cluster of domestic technology companies, foreign control of the company was out of the question.
"The moment that control of Embraer passes to a company from another country, it will control strategic decisions" for Brazil, he said. "No country would give up control of that." He cited the Gripen fighter jets Embraer will build with Sweden`s Saab AB
Boeing and Embraer last year signed a deal under which the U.S. planemaker will help market the new military cargo jet but also provide maintenance services once they are sold.
The government`s opposition to a full sale does not preclude a more targeted deal, according to a source familiar with the matter. "The deal is strategically important for Boeing because it will fill out its commercial line with regional jets."
Some kind of commercial jet joint venture between the two jet makers would "make a lot of sense," Teal Group analyst Richard Aboulafia said. "Even some kind of military joint venture such as military transports would make sense - but an acquisition of Embraer makes no sense."
Embraer shares, which soared 20 percent on Thursday, were up another 2.7 percent on Friday. Boeing shares dipped 0.24 percent.
It would be harder to quantify the gains to shareholders from a more limited joint-venture deal than with an outright acquisition, said Cowen analyst Cai von Rumohr.
"I honestly think Boeing knew all along that it would be a joint venture or partnership," he said. "But just like with Airbus-Bombardier, you can still set up something along those lines that`s clearly a win-win."
The Boeing-Embraer talks come just two months after Airbus SE
Potential gains for Embraer would include Boeing`s greater sales clout with major airlines, as well as with servicing existing jets and potential savings with suppliers, he said.
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