BRASILIA (Reuters) - Boeing Co (BA.N) and Brazilian planemaker Embraer SA (EMBR3.SA) are looking to create a third company for their partnership, a person familiar with the matter said on Friday, as the companies sought Brasilia’s nod for the tie-up.
The new company would not include Embraer’s defense unit, according to Globo TV’s top economic correspondent, who first reported the plan on her blog on Friday, without citing sources.
A Boeing representative in Brazil said the structure of a possible deal with Embraer was “still being studied.”
Embraer shares, which surged as much as 9 percent on the first reports, retreated after Boeing’s comments, paring gains to around 2 percent on the Sao Paulo stock exchange.
Representatives for Embraer and Brazil’s Defense Ministry, which set up a committee to make recommendations to the government on a partnership, declined to comment immediately.
Boeing’s proposed tie-up with Embraer, the world’s third-largest planemaker, would give it a leading share of the 70- to 130-seat market and create stiffer competition for the CSeries program designed by Canada’s Bombardier Inc (BBDb.TO) and backed by European rival Airbus SE (AIR.PA) last year.
Brazil’s government has pushed openly for a partnership between Embraer and Boeing focused more narrowly on commercial aviation, rather than an outright acquisition, due to concerns about the independence of Brazilian defense programs.
The government, which holds about 10 percent of Embraer shares through public-sector funds, still has veto power over Embraer’s military programs and any takeover attempts due to a golden share in the former state enterprise.
Boeing would be willing to preserve the government’s golden share in Embraer and has proposed ways to safeguard defense programs in Brazil along the lines of its partnerships in Britain and Australia, sources have told Reuters.
Reporting by Ricardo Brito; Writing and additional reporting by Brad Brooks and Brad Haynes; Editing by Daniel Flynn, Phil Berlowitz and Susan Thomas