Key Points
- Boeing will pay Embraer $150 million following arbitration.
- Boeing canceled a $4.2 billion acquisition of Embraer’s commercial jet unit in 2020.
- Analysts had expected a higher payout, between $300 million and $400 million.
- Despite the lower settlement, Embraer’s stock is up 120% in 2023 due to strong demand for its aircraft.
Boeing will pay Brazilian planemaker Embraer $150 million following its decision to depart from a planned commercial aviation partnership in 2020. The payment, announced on Monday, marks the end of a lengthy arbitration process that began after Boeing canceled a $4.2 billion deal to acquire Embraer’s commercial jet-making operations. The U.S. company backed out of the agreement during the COVID-19 pandemic, citing the global health crisis and financial challenges.
The arbitration ruling and payment concluded a dispute that started when Boeing claimed Embraer failed to meet certain conditions for closing the transaction, which was first announced in 2018. Embraer, on the other hand, argued that Boeing pulled out due to its broader financial difficulties rather than any fault of Embraer’s. The dispute ultimately triggered the arbitration process, resulting in a settlement.
Following the announcement of the settlement, Embraer’s shares on the São Paulo stock exchange fell by 4.5%, as the $150 million payout was lower than analysts had predicted. JPMorgan analysts, led by Marcelo Motta, had forecasted that Embraer could receive between $300 million and $400 million from the arbitration. Despite the lower-than-expected payout, Embraer’s stock remains up 120% year-to-date as the company continues to experience strong demand for its aircraft.
While the settlement amount is below expectations, analysts noted that it will still help Embraer reduce its debt load. “The cash received was below ours and likely the street’s expectations,” JPMorgan said in a report. Nonetheless, it helps Embraer further deleverage its operations.”
Boeing confirmed the agreement in a separate statement but did not disclose the settlement figure. The U.S. aerospace giant expressed satisfaction with the conclusion of the arbitration process and highlighted its long-standing relationship with Brazil. “We’re pleased to have concluded the arbitration process with Embraer,” Boeing stated, emphasizing the importance of its 90-year partnership with Brazil and its continued commitment to the country’s aerospace industry.
