Shares of Longs Drug Stores (NYSE:LDG) rose significantly yesterday on heavy volume following published rumors that the company, which operates 467 stores in the western U.S. -- the vast majority of those in California -- was a takeover target. Citing company policy, Longs refused the NYSE's request for a statement. That, no doubt, only fueled the fire.

It wouldn't be far-fetched to imagine that Longs, with its massive West Coast footprint, would interest, say, competitors CVS (NYSE:CVS) and Walgreen's (NYSE:WAG). But there's no concrete evidence suggesting that a potential takeover by either company -- or, for that matter, factual information of any kind -- is behind yesterday's rumors.

What would an acquirer get in Longs? The chain has managed sales growth of 1.3% through the three fiscal quarters ended Oct. 30 despite decreased same-store sales. (Full quarterly financial results are scheduled for release after today's market close.) That's not particularly compelling, but since the company lowered the proverbial bar with a downbeat February press release, its shares have nevertheless risen steadily and have, in a roundabout way, managed to keep pace with the S&P 500 over the last 12 months.

Potential acquirers might also be encouraged by Longs' efforts to meet targets, improve gross margins, manage inventory and distribution, and generate free cash flow in excess of net income in the first half. Management got a vote of confidence when the board elected Warren Bryant, already its president and CEO, to the additional post of chairman in August.

Whether all this means the company deserves its premium (on a trailing-12-month price-to-earnings basis) over CVS and Walgreen's -- not to mention companies like Rite Aid (NYSE:RAD) and Duane Reade (NYSE:DRD) -- is another question. Certainly as a smaller player it has more room to grow, but at its current size it can't match the big guys' economies of scale, which means thinner profit margins.

What's also likely is that investor interest will be trained increasingly on this sector. If Longs truly is "in play," that adds further drama to the soap opera being played out at J.C. Penney (NYSE:JCP), which claims it will make a decision about what to do with its Eckerd drugstore chain in the next few weeks.

Dave Marino-Nachison can be reached at dmarnach@fool.com.