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Brasília (AFP)

Shares in the Brazil aircraft manufacturer Embraer soared Wednesday on the back of speculation that a deal to create a new company with US plane-maker Boeing was in the offing.

Embraer stock was up 4.77 percent at midday Wednesday on the Sao Paulo stock exchange after peaking at a six percent rise earlier in the day.

On Tuesday, shares in the flagship company of Brazilian industry had already closed up 5.1 percent.

The daily Folha de S. Paulo said Wednesday the government had agreed in principle on the proposed tie-up -- which media reports say would leave Boeing as the majority partner in a new company -- but had yet to make an official announcement.

It said an official deal would be announced in the coming days.

According to the economic daily Valor earlier this week, Embraer would keep sole control of its military activities under the agreement and would merge its civilian aircraft building with the US giant.

Embraer, the third largest aircraft manufacturer in the world, was founded as a state group in 1969 before being privatized in 1994, although the Brazilian government retained the right to make strategic decisions for the company.

Folha said the two manufacturers would create a third company, in which Boeing would have an 80 percent controlling stake and Embraer 20 percent.

Embraer, with a $6 billion turnover and 16,000 employees, confirmed to AFP on Monday they were in "advanced negotiations" with Boeing.

Taking charge of Embraer's civilian airliner business would allow Boeing to compete more effectively in the medium-range aircraft market with Airbus, which last October formed a strategic partnership with Canadian manufacturer Bombardier.

© 2018 AFP