What happened

Shares of communications services company R.R. Donnelley & Sons (NYSE:RRD) rose roughly 10% in early trading on Monday. The big news here came out before the market opened, but it really takes the story all the way back to Nov. 3.

So what

Early in November, R.R. Donnelley agreed to be taken private by affiliates of Atlas Holdings. According to the deal, shareholders would receive $8.42 per share in cash for each R.R. Donnelley share they own. However, as is often the case, the company was allowed to seek out better offers. On Nov. 16, it got one from Chatham Asset Management for $9.10 per share in cash. That was an 8% improvement, but there's a hurdle here because R.R. Donnelley has to pay a breakup fee to Atlas of $20 million if it takes on another partner. Chatham has agreed to pay that fee, with some conditions.

The letters M & A with three pairs of hands working.

Image source: Getty Images.

Today, R.R. Donnelley announced that it has received a third offer, this time for $10 per share in cash from another suitor (the company didn't disclose a name). That's a nearly 19% improvement on the original offer from Atlas and, clearly, much more tempting. However, R.R. Donnelley didn't say whether or not the latest proposal included the acquiring entity paying the breakup fee. But it is clear that the company is in play at this point, with three offers on the table. Investors bid the stock higher, perhaps expecting an updated offer from one of the earlier players, noting that the stock is trading above the latest $10 per share offer price.

Now what

There's still no final resolution as the board is continuing to examine the offers here. At this point the company remains committed to the original Atlas merger; however, given the additional players, investors clearly believe something interesting is going to happen. But, stepping back, any improvement in the deal from here is likely to be less material than what has been seen so far. And, if the company goes with one of the lower offers for some reason, the stock price will fall. Unless you have very strong feelings about the outcome of this merger contest, most investors will probably be better off selling to lock in profits.

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