Brazil’s Embraer said Monday it has initiated an arbitration proceeding to recover damages against Boeing for scuttling a $4.2 billion deal between the two companies.

After two years of negotiations, Boeing on Saturday cited an inability to agree on final terms in terminating its proposed acquisition of an 80% stake in Embraer’s commercial jet business.

“Boeing exercised its rights to terminate after Embraer did not satisfy the necessary conditions,” the company said in a statement.

But Embraer shot back by accusing Boeing of manufacturing “false claims as a pretext to seek to avoid its commitments to close the transaction,” which would have enabled the U.S. planemaker to broaden its portfolio of aircraft to compete with European rival Airbus.

“We believe Boeing has engaged in a systematic pattern of delay and repeated violations of the [transaction agreement] because of its unwillingness to complete the transaction in light of its own financial condition and 737 MAX and other business and reputational problems,” Embraer said in a statement on Saturday.

The company added that it would “pursue all remedies against Boeing for the damages incurred by Embraer.”

According to the Seattle Times, “Industry observers had been expecting Boeing’s decision, and essentially agree with Embraer. They believe the real reason for terminating the deal is the collapse in demand for airplanes due to the coronavirus pandemic and Boeing’s urgent need to conserve cash as revenue dries up.”

Boeing has estimated the cost of the MAX grounding at $19 billion.

“It’s a liquidity question,” Bank of America analyst Ron Epstein told the Financial Times. “Is Boeing in a position to spend $4 billion on an acquisition given what’s going on in the broader commercial aviation market?”

The deal would have given Boeing a strategic foothold in the market for smaller regional jets but “faced several obstacles over the past year and a half, with substantial political opposition in Brazil while in Europe regulatory approval has taken longer than expected,” the FT noted.

Embraer shares fell as much as 16% in Sao Paulo to a more than eight-year low on news of the cancellation.

Stephen Brashear/Getty Images

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