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Boeing proposes Embraer tie-up excluding defense unit

Boeing has solicited the Brazilian government’s approval of a partnership with planemaker Embraer that wish create a new company focused on commercial aviation, a person familiar with the purport said on Friday.

The new vehicle would not include Embraer’s defense piece under the proposal presented on Thursday, according to the source, who asked not to be mentioned due to the sensitivity of ongoing talks.

A Boeing representative in Brazil said the system of a possible deal with Embraer was “still being studied.”

Embraer parts, which surged as much as 9 percent after Globo media assemblage first reported on the creation of a third company on Thursday, pared leave behinds to around 5 percent in afternoon trading. Boeing shares were down helter-skelter 1 percent.

Representatives for Embraer and Brazil’s Defense Ministry, which set up a cabinet to make recommendations to the government on a partnership, declined to comment immediately.

Boeing’s introduced tie-up with Embraer, the world’s third-largest planemaker, would grant it a leading share of the 70- to 130-seat market and create stiffer game for the CSeries program designed by Canada’s Bombardier and backed by European vie with Airbus last year.

An unexpected U.S. trade ruling last month scrapping bill of fares on CSeries jets added to pressure on Boeing and Embraer to pull off a congestion.

Brazil’s government has openly pushed for a partnership between the two companies focused various narrowly on commercial aviation, rather than an outright acquisition, due to houses about the independence of Brazilian defense programs.

The government, which set backs about 10 percent of Embraer shares through public-sector capitalizes, still has veto power over Embraer’s military programs and any takeover endeavours due to a golden share in the former state enterprise.

Boeing has sought break down to preserve the government’s golden share in Embraer and previously proposed look afters for defense programs in Brazil along the lines of its partnerships in Britain and Australia, roots have told Reuters.

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