Cade approves the transaction involving Embraer and Boeing
Merger and Acquisition
The Administrative Council for Economic Defense (Cade) approved the transaction involving Boeing and Embraer this past Monday, 27th of January. The agency concluded the companies do not compete in the same markets and therefore the purchase presents no competitive issues. The order of approval regarding the acquisition was signed on Tuesday, 28th of January.
The transaction analyzed by Cade involves two operations. The first is the acquisition by Boeing of 80% of Embraer’s assets related to the company’s commercial aircraft division, which includes the manufacturing of regional airliners and large commercial aircrafts (Commercial Operation). The second is the creation of a joint venture between Boeing and Embraer dedicated to the manufacturing of the military aircraft KC-390, with 49% and 51% stakes, respectively (Defense Operation).
For the analysis of the Commercial Operation, Cade investigated the segment of commercial aircrafts with seat capacity ranging from 100 to 150, the market involved in the transaction. The investigation carried out by the entity conclude the operation will not affect negatively the existing level of competition in this market, despite the unfavorable entry conditions observed in the sector. Actually, the expansion of Boeing’s operation will likely increase its ability to impose competitive pressure against the front runner Airbus.
In regards to the Defense Operation, Cade analyzed the global market of manned military aircrafts which encompass the KC-390 manufactured by Embraer, and the aircrafts C-40, Clipper and KC-46 A Pegasus, by Boeing. The agency came to the conclusion there will be no opportunity to exercise market power since the transaction does not involve the merger of the companies’ portfolios of military aircrafts, but only the participation in a joint project.
Cade determined the transaction will benefit Embraer which will become a strategic partner of Boeing. Thus, the sectors retained by Embraer - executive aviation and defense - will be provided with greater technological and commercial cooperation from Boeing. Besides, the heavier investments related to the commercial division, which faces strong competition from Airbus, will be borne by Boeing.
Therefore, Cade decided to approve the transaction with no restriction. The analysis of the merger by the agency was strictly regarding competition matters.
Access the Merger and Acquisition Process no. 08700.003896/2019-11.