What happened

Shares of Meredith Corporation (NYSE:MDP) shot through the roof Friday, surging as much as 31.1%. As of 12:43 p.m. EDT, the stock was trading 26.1% higher.

Reports emerged late yesterday that the magazine publisher was in advanced talks to be acquired by IAC/InterActiveCorp (NASDAQ:IAC) in a deal valued at $2.5 billion. This was according to The Wall Street Journal, who cited the oft-quoted "people familiar with the situation.

Person at a table reading a magazine.

Image source: Getty Images.

So what

Owning Meredith, the publisher of such high-profile magazines as People, Better Homes & Gardens, InStyle, Entertainment Weekly, and Martha Stewart Living, would be a good fit for IAC. The acquisition would greatly enhance the company's existing stable of digital publications, which includes Brides, Serious Eats, and TripSavvy.

The move would also reinvigorate IAC's portfolio of holdings after the company spun off online dating kingpin Match Group in mid-2020 and video-sharing platform Vimeo earlier this year.

Meredith bet big on the future of the magazine industry back in late 2017 when it acquired legacy publishing giant Time in a deal valued at $1.85 billion. The acquisition gave it control of Time's 50 websites, 40 magazines, and 17 television stations. 

However, Meredith decided to reduce its debt load and sold off many of the flagship names in the portfolio a short time later, including Time, Sports Illustrated, Fortune, and MONEY, while also focusing on its target demographic of American women. Meredith also sold its collection of 17 TV stations to Gray Television earlier this year for $2.7 billion. 

Now what

The acquisition by IAC is by no means a done deal, as other suitors have been trying to reach an agreement. Private-investment firm The Najafi Companies has reportedly also been in the running.

However, with a potential bidding war on the horizon, investors are viewing this development as good news and have pushed Meredith's market cap up near the valuation of the reported deal.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.