Boeing In Talks With Embraer Over Possible Takeover

Boeing (NYSE:BA) recently revealed that it is in talks with Embraer for a potential multi-billion dollar takeover in a move that could completely shake up the global aerospace industry. This news comes after Airbus bought a controlling stake in Bombardier’s C series regional passenger jet program back in October.

Should the deal go through, it would mark the single largest acquisition made by the Chicago-based aircraft manufacturer since its deal with McDonnell Douglas in 1997 for $13 billion. Following the news, Embraer’s stock jumped by almost 20%.

The completion of the deal would enable Boeing to greatly broaden its product range, while efficiently tackling Airbus’ move into the regional jet space.

Why Is Boeing Suddenly Interested In Embraer?

For decades, the company has stayed away from the less profitable regional and smaller commercial jet space. However, developments in the recent past have forced the company to think differently.

As mentioned above, Airbus recently concluded a deal with Bombardier to buy a controlling stake in its C series program. This means that Airbus, which until October had remained independent of the regional jet market, has made a bold and direct move into it. Essentially, this leaves Boeing hanging dry – and here’s where Embraer comes into the picture.

Embraer is a Brazilian aerospace conglomerate that manufactures commercial jets that seat about 100 to 150 people; just about the same number of people that Bombardier’s C series jets can accommodate. A takeover or partnership with Embraer will allow both companies to efficiently ward off the Airbus-Bombardier threat, while synergies from the deal will greatly benefit their top and bottom lines.

So What Now?

The talks, still in their nascent stages, have a long way to go. The Brazilian government has a large stake in the company, and can easily veto the deal under a “transfer of control” provision. That said, according to Reuters, a government source mentioned that it is open to a partnership, but not a total sale of the company, which seems more plausible given the way things are, anyway.

It is still too early and only a matter of speculation at the moment. We can expect to learn more about the deal after the holiday season, when both companies make updated statements about their plans.

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