Scores of investors tuned in to TV manufacturer Vizio's (NYSE:VZIO) stock on Tuesday following reports that the company is a potential acquisition target. An excited market traded the shares up by nearly 24% on the day, providing a sharp contrast to the 1.4% slump of the S&P 500 index.
A retail behemoth could soon be Vizio's new owner
An article published that day in The Wall Street Journal stated that Vizio is in talks with retail giant Walmart (NYSE:WMT) regarding a sale. Quoting unidentified "people familiar with the matter," the financial newspaper said that the discussions center around Walmart purchasing Vizio for over $2 billion.
The Journal added that Walmart is interested in acquiring the company in order to gain more places where it can place its ads and promote its wares.
For years, Vizio has been Walmart's largest customer; its TVs are sold prominently at the retailer's stores.
Vizio's current market cap is just over $1.9 billion. Should a buyout occur, it's likely Walmart would pay a premium. Its target is consistently profitable and crushed estimates in its latest quarterly earnings report. It is slated to publish its fourth-quarter earnings after market open on Tuesday, Feb. 27.
Sure to be a premium buyout
Unsurprisingly, as they're apparently in the midst of discussions, neither Vizio nor Walmart has yet commented on the potential deal. It makes a lot of sense for Walmart to take ownership of an important brand in its stores, and the retailer will likely offer a buyout price Vizio and its shareholders can't refuse.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walmart. The Motley Fool has a disclosure policy.
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