Zhonghang Electronic Measuring Instruments Co (ZEMIC) late on Wednesday said it will acquire Chengdu Aircraft Industrial Group by issuing 2.09 billion shares at 8.36 yuan ($1.17) each to Aviation Industry Corp of China (AVIC).

ZEMIC's share price surged 20% on the Shenzhen stock exchange on Thursday, hitting the daily trading limit.

The asset restructuring deal comes as the government pushes state-owned enterprises to inject high-quality assets into their listed vehicles to optimise the public sector.

Following the deal, Chengdu Aircraft - which state media said makes stealth fighter J-20 - will become more market-oriented in its operations and governance, ZEMIC said.

The deal, which is pending authorities' approval, will also expand AVIC's fundraising channels and support the group's product development, ZEMIC said in its filing.

Chengdu Aircraft's other jets include the J-10 fighter and JF-17 Thunder, its website showed.

The firm also supplies parts for civil aircraft and participated in the development of China's home-grown narrow-body jet C919 - a rival to the Airbus A320neo and Boeing 737 MAX single-aisle families.

AVIC effectively controls ZEMIC through stakes in other companies. After the new issuance, it will directly own 78.07% of ZEMIC from 0.62% beforehand, Wednesday's filing showed.

($1 = 7.1323 Chinese yuan renminbi)

(Reporting by Roxanne Liu, Ella Cao and Kane Wu; Editing by Christopher Cushing)