Brazil’s Embraer SA on Monday said it had begun an arbitration process against Boeing Co, after the United States planemaker abruptly cancelled a $4.2bn deal over the weekend that was years in the making.
Embraer shares fell as much as 16 percent in Sao Paulo to a more than eight-year low on news of the cancellation, suggesting investors had hoped until the last minute that the takeover agreement would not fall apart.
The sudden collapse, triggered by a deadline that Boeing refused to extend, drew an irate response from Embraer on Saturday.
But on Monday, when Embraer executives hosted a call with analysts, the angry rhetoric was largely absent. Embraer is in a delicate situation, having bet the future of the company on Boeing only to find itself now in isolation and without a Plan B, all while the coronavirus crisis ravages the travel industry.
Still, Embraer tried to reassure investors that it remains a solid company, although its CEO Francisco Gomes Neto acknowledged that 2020 will be a “tough” year and that 2021 “will be worse than we had thought”.
He added that Embraer has been able to find $1bn in cash savings for 2020 and that it has not suffered any aircraft order cancellations due to the coronavirus crisis.
Gomes Neto declined to provide more details on the arbitration process and if it will be accompanied by a lawsuit in either a Brazilian or a US court.
Embraer had hoped to sell 80 percent of its profitable commercial aviation unit to Boeing and benefit from the US planemaker’s marketing power to scale up sales of its E2 regional jets, which have been lauded for their fuel-efficiency even as sales have lagged.
It would then use Boeing’s cash to wipe out all of its previous debt and pay a $1.6bn dividend to shareholders.
Boeing, meanwhile, was aiming to compete more directly with Airbus in the regional jets segment.
Newsdesk
