EC ‘Stops the Clock’ in Boeing-Embraer Merger Probe

 - November 11, 2019, 1:45 PM

Boeing’s proposed acquisition of 80 percent of Embraer’s commercial aircraft division appears likely to face another delay after the European Commission on Monday said it has “stopped the clock” in its in-depth investigation of the transaction. “This procedure in merger investigations is activated if the parties fail to provide, in a timely fashion, important information that the Commission has requested from them,” a Commission spokesperson told AIN, confirming a report first revealed by Bloomberg. Failure to provide the requested information will lead the European Union’s antitrust regulator to stop the clock. Once the parties supply the missing information, the clock re-starts and the deadline for the Commission’s decision gets adjusted accordingly.

In an emailed statement to AIN, Boeing and Embraer stressed they “have been engaged with the European Commission and other global regulatory authorities since late last year,” adding they have received clearance to close the transaction from “a number of jurisdictions,” including the U.S. and Japan. “We continue to cooperate with the European Commission as they assess our transaction and look forward to a positive resolution,” they said.

Boeing and Embraer announced the deal in July 2018 and the sides initially had expected to close the transaction by the end of this year. They revised the timeline last month to “early 2020” after the EU informed the airframers it would conduct an in-depth investigation into the deal.

The Commission launched the Phase II probe because its initial investigation raised concern the tie-up may remove Embraer as “a small but important competitive force in the concentrated overall single-aisle market.” It said it believed potential entrants from China, Japan, and Russia seem to face high barriers to entry and expansion and wouldn’t likely replicate within the next five or even 10 years the competitive constraint currently exerted by the Brazilian aircraft manufacturer.

In its October 4 release announcing the in-depth review, the Commission pointed out that Boeing and Embraer decided not to submit commitments during the initial investigation to address its preliminary concerns.

Under EU merger rules, the Commission has 90 working days, until February 20, to take a decision in its Phase II analysis of the transaction. The Commission has extended its timing by a further 10 days, until March 5, before suspending the review, Bloomberg reported. That will push the anticipated closing of the deal into the second quarter.