SEATTLE _ Boeing is discussing a potential multibillion-dollar takeover of regional jetmaker Embraer of Brazil, the two companies said Thursday.
A deal is by no means certain since the Brazilian government would have to approve the sale of a company considered the crown jewel of the country's manufacturing sector.
A successful transaction would be Boeing's largest acquisition since it bought McDonnell Douglas 20 years ago.
"There have been productive discussions," said a person with knowledge of the talks. "But there's a long way to go. It's subject to all sorts of regulatory and (Brazilian) government approvals."
In separate, identical statements Boeing and Embraer confirmed that discussions are ongoing "regarding a potential combination, the basis of which remains under discussion."
Though Boeing has had a close relationship with Embraer for years, its move now is widely seen as a counter to Airbus's proposed aquisition of a majority stake in the new CSeries regional jet designed and built by Bombardier of Canada.
Embraer, headquartered outside São Paulo, competes successfully against Bombardier and has established itself as the world's leading maker of regional jets _ smaller and shorter-range airplanes than those built by Airbus and Boeing, used on many domestic flights on less dense routes.
Thursday morning, after the Wall Street Journal broke the news of of the acquisition talks, Embraer's stock shot up more than 30 percent, then fell back. Late morning shares were still up more than 17 percent on the day, giving the company a market value of about $3.7 billion.
If Boeing can persuade the government of Brazil to consider a sale_which would surely require firm guarantees on preserving jobs in Brazil and maintaining the brand _ it would likely have to pay a hefty premium above that to secure a deal.
In many ways, the two companies would be a natural fit, with complementary rather than overlapping products.
In 2012, the two announced a broad, formal cooperation agreement, which extends to multiple projects including Embraer's KC-390 military cargo plane.
An acquisition of the entire company would include Embraer's extensive military airplane and corporate jet businesses, as well as its commercial aviation unit.
Yet in particular, Boeing must have its eye on Embraer's new line of E2 jets, a substantial revamp of the E-jet family that was introduced to counter Bombardier's CSeries jet family, an all-new design.
The E2s feature the latest Pratt & Whitney geared turbofan engines as well as a new wing and landing gear.
The initial model, the E-190-E2 seating 106 passengers in a single class configuration, is currently completing flight test and certification. Widerøe Airlines of Norway is set to take delivery of the first E190-E2 in April.
The deal Airbus announced in October to aquire a majority stake in the Bombardier CSeries program potentially secures the smaller end of the single-aisle jet market for the European jetmaker, with the 110-seat CS100 jet and the 130-seat CS300 jet filling the market space below its own 150-seat A320 jets.
By buying the E2 jets, Boeing would create a similar line-up, with the E190-E2 and the 132-seat E195-E2 supplementing its new 737 MAX single-aisle jets.
However, the move would be tantamount to killing the smallest MAX, the 138-seat 737 MAX 7, just as in making its CSeries move Airbus effectively abandoned its A319neo. Both the MAX 7 and the A319neo are poor sellers.
The fact that Boeing is engaged in serious discussion with Embraer about a potential acquisition contradicts the U.S. jetmaker's argument before the federal International Trade Commission (ITC) in the case aimed at blocking sales of the CSeries to Delta and other U.S. airlines.
Bombardier, facing financial collapse this year, offered Boeing this summer the chance to take a stake in the CSeries. Boeing walked away and instead chose to continue its litigation to block the CSeries.
When Airbus stepped in, Boeing's public stance was dismissive.
In the ITC case, Boeing's lawyers argued that the Airbus deal with Bombardier is a dubious ploy to get around the tariffs, may never be finalized, and is unlikely to result in Airbus making the CSeries in Mobile, Ala., as the European jetmaker has promised.
Yet Boeing's secretive move on Embraer indicates that Boeing sees the Airbus move as a serious threat, one that could potentially leave its rival with a breadth of offerings in the single-aisle jet market that could prove unassailable.
In a note to clients Thursday, Wall Street analyst Rob Stallard of Vertical Research Partners, said Boeing's interest in Embraer would "appear to indirectly endorse the strategy that Airbus has pursued."
If its move on Embraer succeeds, Boeing should have an equally bold and effective counter.
If it fails to go through, the aviation world will more clearly see Airbus at a competitive advantage.
