Brazil government approves Boeing-Embraer tie-up

The Boeing logo is pictured at the Latin American Business Aviation Conference & Exhibition fair (LABACE) at Congonhas Airport in Sao Paulo, Brazil August 14, 2018. REUTERS/Paulo Whitaker/File Photo

SAO PAULO (Reuters) – The Brazilian government on Thursday said it would allow a proposed tie-up between planemakers Embraer SA (EMBR3.SA) and Boeing Co (BA.N) to go forward, capping weeks of uncertainty in which President Jair Bolsonaro expressed his hesitation.

The deal still must be approved by shareholders and regulators, but winning the backing of Brazil’s government was its biggest hurdle.

Under the proposed deal, Embraer will sell 80 percent of its commercial plane division, its most profitable, for $4.2 billion. The deal is seen as part of a reshaping of the global aviation market for mid-sized planes. It follows a similar deal by Boeing’s rival Airbus (AIR.PA) which bought Bombardier Inc’s (BBDb.TO) commercial plane division that competed with Embraer.

Embraer’s private shareholders now must vote to approve or reject the deal within 30 days.

Shortly after assuming the presidency on Jan. 1, Bolsonaro, a former army captain, had expressed concern that Boeing might end up owning all of Embraer if the deal was approved under the terms proposed.

But on Thursday, a statement from his office said his government had analyzed the proposal and found that it “preserves (Brazil’s) sovereignty and the national interests.”

Reporting by Marcelo Rochabrun; Editing by Brad Brooks and Lisa Shumaker