Embraer-Boeing aviation deal blocked by Brazilian court

BRASILIA (Reuters) – A Brazilian federal court on Thursday granted an injunction blocking the proposed tie-up between planemakers Boeing Co (BA.N) and Embraer SA (EMBR3.SA), according to a court document seen by Reuters.

The logo of Brazilian aviation company Embraer is seen during the Latin American Business Aviation Conference & Exhibition fair (LABACE) at Congonhas Airport in Sao Paulo, Brazil August 14, 2018. REUTERS/Paulo Whitaker

The decision, which can be appealed, forbids Embraer’s board of directors from signing the deal with Boeing. Boeing declined to comment and Embraer did not immediately reply to a request for comment.

The legal action was brought by four congressmen with Brazil’s leftwing Workers Party, which is opposed to the deal.

Labor groups in Brazil often bring court challenges against significant business deals and it is possible this injunction will be reversed.

Embraer shares in Sao Paulo fell 1 percent following the release of the decision. Shares ultimately closed 2.42 percent lower on Thursday.

The companies announced in July that Brazilian planemaker Embraer would sell 80 percent of its commercial aviation business to Boeing in a deal that valued that business segment at $4.75 billion. Embraer is one of the world’s largest makers of mid-sized planes of up to 150 passengers and used to compete in that market segment with Canada’s Bombardier Inc (BBDb.TO).

Bombardier spun off its mid-sized commercial jet division earlier this year after selling a controlling stake to Boeing rival Airbus (AIR.PA).

The deal between Boeing and Embraer is widely seen as a reaction to Airbus’ previous deal with Bombardier.

But the deal has stalled, partly because the Brazilian government, which has the power to veto important decisions at the planemaker, has been reluctant to give it a greenlight.

President Michel Temer said he would leave the decision to the future administration, which takes office Jan. 1. President-elect Jair Bolsonaro has said he is in favor of the deal.

Reporting by Ricardo Brito; Additional reporting by Eric M. Johnson in Seattle; Editing by Lisa Shumaker and David Gregorio