Boeing “wrongfully” terminates deal to buy Embraer Commercial Division for $4.2B


Boeing “wrongfully” terminates deal to buy Embraer Commercial Division for $4.2B

Today in a recent Press Release sent out by Boeing (NYSE: BA), they annoucned that they have officially terminated its Master Transaction Agreement (MTA) with Embraer (NYSE: ERJ). The agreement would have brought the two companies together to establish a strategic partnership.

The two companies were planning on partnering up through combining the commercial aviation business of Embraer and to develop new market for the C-390 Millennium medium airlift and air mobility aircraft around the world.

Although officially in the MTA, the initial termination date was filed on April 24, 2020 with the possibility of extension by either party should certain parameter be satisfied. Boeing exercised their right to terminate the contract after Embraer Failed to satisfy the defined conditions of the agreement.

A excerpt from the official Press Release can be seen below:

“Boeing has worked diligently over more than two years to finalize its transaction with Embraer. Over the past several months, we had productive but ultimately unsuccessful negotiations about unsatisfied MTA conditions. We all aimed to resolve those by the initial termination date, but it didn’t happen,” said Marc Allen, president of Embraer Partnership & Group Operations. “It is deeply disappointing. But we have reached a point where continued negotiation within the framework of the MTA is not going to resolve the outstanding issues.”

The planned partnership between Boeing and Embraer had received unconditional approval from all necessary regulatory authorities, with the exception of the European Commission.

Boeing (NYSE: BA)

The image below shows the current stock price of (BA) as of April 25, 2020.

Embraer (NYSE: ERJ)

Today Embraer also took the time to comment on the notice of termination of the Master Transaction Agreement (MTA) it had in place with Boeing.

Embraer has stated that they strongly believe that the termination of the MTA was done wrongfully. They believe that Boeing has manufactured false claims as a pretext to avoid its commitments to close the transaction. The have stated that with the systematic pattern of delays and violations of the MTA was due to the current financial conditions of Boeing unrelated to the Agreement with Embraer.

As the 737 MAX line continues to be at a stand still and more orders for airlines are being reduced they are under the impression that these factors have contributed to the decision to terminate the agreement.

An except from the official press release states:

Embraer will pursue all remedies against Boeing for the damages incurred by Embraer as a result of Boeing’s wrongful termination and violation of the MTA.

Embraer remains today a successful, efficient, diversified and vertically integrated company, with a history of serving customers with highly successful products and services built on a strong foundation of engineering and industrial capabilities. Embraer is an exporter and technology developer, with global presence and defense, executive and commercial businesses.

Our employees will proudly continue to provide for our clients the high quality products and services they depend on from Embraer every day. Our history of over 50 years is lined with many victories but also some difficult moments. All of them were overcome. And that’s exactly what we are going to do again. Overcome these challenges with strength and determination.

The image below shows the current stock price of (ERJ) as of April 25, 2020

As a disclaimer all trade ideas are for education purposes and not meant to be used as financial advise. All investing involve risks, including loss of principal. Past performances do not guarantee future results or success. Stock and Forex markets are volatile and can decline significantly in response to adverse regulatory, market, economic development. Asset allocation and diversification do not eliminate risk. All Content is used for illustrative purposes and for educational use only.

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