Boeing Tries to Overcome Brazil's Resistance to Embraer Takeover

Boeing Co. is in discussions with Embraer SA and the Brazilian government on ways to address the government's concerns about the U.S. planemaker's potential takeover of its Brazilian rival, according to people familiar with the matter.

Boeing and Embraer had informally agreed to terms that would value the Brazilian company at $28 a share, the people said.

But after The Wall Street Journal reported on the talks last month, some Brazilian officials came out against a deal. President Michel Temer said the government would welcome a new investment in Embraer but wouldn't permit a change in control of the company. A government spokesman said Friday that the country's position hasn't changed.

The companies are now in discussions with the government about ways to overcome that resistance, which centers largely on Embraer's defense business. Boeing is sensitive to those concerns and is proactively trying to address them, one of the people said.

The American company is considering allowing the government to maintain a golden share in the defense business, which it has in the entire company now, the people said.

Via its golden share, the Brazilian government has veto power over any transaction that would transfer control of Embraer, a former state-owned entity considered a jewel of Brazilian industry that still has close ties to the country's military establishment.

As of Friday morning, Embraer's U.S. shares were trading at just under $27, nearly 35% more than their price just before the possible deal surfaced.

It's uncertain whether the two sides will find a mutually agreeable arrangement. But if a deal were to be reached, it would likely take between nine months and a year to close, one of the people said.

Embraer, based in the city of São José dos Campos in the state of São Paulo, is the world's third-largest commercial-jet manufacturer by revenue and has some 18,000 employees. It's best known for making regional jets in the 70- to 100-seat range, which are heavily used on routes where demand doesn't warrant use of larger Boeing or Airbus planes. Boeing is also willing to take steps to protect Embraer's brand, management and jobs, people familiar with the matter have said.

Boeing is the world's largest aerospace company with a market value of about $180 billion. It makes commercial jetliners and defense, space and security systems as well as military aircraft, weapons, satellites and helicopters.

Buying Embraer would also increase Boeing's exposure to the market for business jets, which has been under pressure from sluggish sales since the financial crisis.

--Luciana Magalhaes contributed to this article.

Write to Dana Mattioli at dana.mattioli@wsj.com and Dana Cimilluca at dana.cimilluca@wsj.com