What happened

Shares of Brazilian airplane manufacturer Embraer (NYSE:ERJ) are soaring Thursday afternoon after a Wall Street Journal report broke mid-day, revealing that Boeing (NYSE:BA) has entered talks about possibly acquiring Embraer -- at a big market to the latter's current market cap.

Up as much as 31% initially, Embraer shares are still sitting atop a 17.6% gain as of 1:30 p.m. EST.

An Embraer E190-E2 jet against a white background.

Like Boeing, Embraer builds passenger jets -- but will Brazil permit it to build them for Boeing? Image source: Embraer.

So what

Up until Thursday morning, Embraer stock was trading for a market capitalization of roughly $3.7 billion. But according to the Journal's report, Boeing is considering paying a "relatively large premium for Embraer" -- exactly how large has not yet been revealed.

Now what

What's more, the talks between Boeing and Embraer have apparently been temporarily shelved while the putative parties figure out how the Brazilian government feels about this potential sale of one of Brazil's industrial crown jewels to a foreign acquirer.

Under Brazilian law, the government holds what is called a "golden share" in Embraer -- giving it the right to veto any acquisition by a foreign buyer like Boeing. Thus, no matter how high Boeing might bid -- and no matter how good a deal it offers to Embraer shareholders, nor how attractive to Embraer management -- there can be no guarantee that a deal will go through.

What's more, if the deal talk collapses, Embraer's share price spike, that appeared so suddenly Thursday afternoon, could just as suddenly vanish.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Embraer-Empresa Brasileira. The Motley Fool has a disclosure policy.