Brazil's Temer Says Embraer Will Remain Under Brazilian Control -- Update

By FeaturesDow Jones Newswires

SÃO PAULO -- Brazil's government would welcome new investment in Brazilian aircraft maker Embraer SA, but won't permit a change in control of the company, Brazilian President Michel Temer said Friday.

Embraer and Boeing confirmed Thursday that they have discussed a plan for the U.S. company to buy the smaller Brazilian aircraft maker. The combination would fortify Boeing in the market segment for smaller, so-called regional jets, where the company currently has little presence.

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The Brazilian government holds a veto over any transaction that would transfer control of the company, which was originally state-owned and still has close ties to the country's military establishment.

"Embraer is Brazilian, it represents Brazil very well abroad," Mr. Temer told reporters Friday. "An injection of foreign capital would be welcome. But we won't consider the question" of a change of control.

Embraer declined to comment on Mr. Temer's stance. Boeing spokesman Phil Musser said the proposed deal with Embraer offered synergies covering commercial jet and defense sales, as well as services.

"As we noted, discussions are ongoing, but we have always had deep respect for the role of the government of Brazil, as well as their important defense and security concerns," he said.

The two companies already cooperate on some military projects. Embraer has a lot to gain from a closer partnership with Boeing, especially in the segment of regional craft, according to Pedro Galdi, an analyst at São Paulo brokerage Magliano Corretora.

"Neither the government nor the military will let Embraer go, it wouldn't make sense to sell off a company with strategic value," he said. "But Embraer would benefit (from a closer partnership) because Boeing has huge marketing power."

Many Brazilians say they would like to see the company stay Brazilian.

"This is a question of national sovereignty," said Wesley DeLucca, 30 years old, a personal trainer from São Paulo. "Brazil's isn't number one in many things, but Embraer is first in its segment. I think the government should veto a sale."

The talks come after an announcement in October by Boeing rival Airbus SE of a deal to take a majority stake in the jetliner business of Canada's Bombardier Inc., which competes with Embraer in the regional jet market.

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 is 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. Its new E2 jet can carry up to 140 passengers.

Boeing's smallest jet has around 130 seats. The company hadn't previously indicated interest in smaller planes. Embraer's defense offerings include the A-29 Super Tucano light-attack and advanced trainer aircraft and the KC-390 military cargo plane, which is marketed by Boeing as part of a joint venture.

Write to Luciana Magalhaes at luciana.magalhaes@wsj.com and Jeffrey T. Lewis at jeffrey.lewis@wsj.com

(END) Dow Jones Newswires

December 22, 2017 14:00 ET (19:00 GMT)