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Graham Packaging Shares Soared: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Graham Packaging (NYSE: GRM  ) surged more than 19% after a yet-to-be-identified third party bid $25 a share for the company. That's a 28% premium to the $4.1 billion bid Silgan Holdings (Nasdaq: SLGN  ) made in April.

So what: Investors cheered Silgan's planned acquisition of Graham Packaging at the time the deal was announced. Today, the stock has slumped as much as 7%. Shareholders see that much value in a combination with Graham.

Now what: The question now is whether Graham's board will back the new offer, and if so, whether Silgan would match or beat the new bid. I think both are likely. Graham is trading for a little less than 13 times next year's earnings, which are expected to improve 23%. Silgan could substantially up its offer and still get long-term value from a deal.

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Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out his portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader.

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Related Tickers

12/31/1969 7:00 PM
GRM.DL2 $0.00 Down +0.00 +0.00%
Graham Packaging CAPS Rating: *****
SLGN $50.97 Down -0.09 -0.18%
Silgan Holdings CAPS Rating: *****