A Brazilian federal judge has suspended the deal that would see Boeing buy 80 percent of Embraer’s commercial aviation business. The companies signed the joint venture, worth $4.75 billion, in July and have faced criticism in Brazil for the deal since.
The judge ordered the companies to “suspend any concrete effect of an eventual decision of the board of Embraer” to sell the company’s commercial jet unit to Boeing until incoming President Jair Bolsonaro takes office Jan. 1. The companies had hoped to complete the deal before the new year.
The judge also warned the companies to avoid making any decisions while the new government settles in that would make it harder to reverse the sale.
This is only the latest move by opponents of the agreement. The injunction resulted from a lawsuit brought by four members of the country’s congress by Brazil’s left-wing Workers Party before the presidential elections earlier this fall. It responds to the dismissal of a previous injunction that required the merger preserve all local jobs at the company.
“The sale of Embraer is deeply damaging to Brazil’s interests,” said Carlos Zarattini, a federal deputy from the party. “It would mean that our aeronautical technology would be totally transferred to Boeing and, with that, we will lose a great company.”
Embraer sees the deal as necessary for the plane maker’s survival. Mere hours after the injunction was issued, the company stated its intent to appeal the ruling. Boeing also wants the deal because it would give the aerospace giant an important foothold to challenge Airbus in the market for smaller regional jets. Many see this deal as a response to Airbus’ decision to purchase a controlling stake in Bombardier’s commercial aviation arm earlier this year.
Boeing and Embraer need the Brazilian government’s blessing to finalize the deal. The government holds a “golden share” that gives it veto power over major decisions by Embraer. This power is a leftover from when the aviation company was state-owned. The government had been reluctant to approve the merger. Outgoing President Michel Tremer said he would leave it to the next government to make the final decision.
While Embraer’s shares dropped in reaction to the news, analysts still foresee that the deal will go through. The injunction doesn’t kill the merger—it merely puts it on hold. President-elect Bolsonaro has spoken in favor of it. It is likely that, once he is in office and is presented with details of the proposed merger, he will sign off on it, giving the companies permission to go to their shareholders for ratification.
Read more about the history of this deal at Boeing-Embraer Partnership an Election Issue in Brazil.