Embraer Jumps on Report Brazil Allows Boeing Deal to Proceed

(Bloomberg) -- Embraer SA and Boeing Co. appear to have moved closer to a long-awaited deal as a Brazilian newspaper reported the government has signed off on the next steps of a planned joint venture.

Embraer shares jumped as much as 7.8 percent after Folha de S.Paulo reported that a memo detailing the creation of a new company to absorb the Brazilian company's line of regional planes will be finalized in the next few days. Boeing would have 80 percent of the new company, while Embraer would own the rest, according to the newspaper, which didn't say where it got the information.

The plane makers have been crafting the venture that would combine their marketing, manufacturing and engineering capacity. Embraer's military-aircraft unit would remain a separate company, as well as its services and executive aviation units, according to the newspaper. Audits by the government for the creation of the company with Boeing should take an additional three to four months, Folha said.

Brazil's air-force chief told lawmakers in Brasilia Wednesday that Embraer still hadn't presented its proposal to the government and that studies being conducted to preserve national sovereignty are in the works. Brazil President Michel Temer was scheduled to meet Tuesday with defense and security chiefs to review terms agreed to by the companies, a person familiar with the matter said.

Embraer said earlier Wednesday that talks with Boeing continued to advance, while Boeing said Tuesday the deal discussions were productive and moving ahead. U.S. markets were closed Wednesday for a holiday.

--With assistance from Samy Adghirni.

To contact the reporter on this story: Julia Leite in Sao Paulo at jleite3@bloomberg.net

To contact the editors responsible for this story: Daniel Cancel at dcancel@bloomberg.net, Jessica Brice, Christiana Sciaudone

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