What: Shares of luxury luggage maker Tumi Holdings (NYSE:TUMI) surged on Thursday following a Wall Street Journal report that luggage giant Samsonite International was close to acquiring the company. At 11:20 a.m. EST Thursday, shares of Tumi were up about 27%, while Samsonite ADRs were up about 2.5%.
So what: While exact terms of the deal aren't known, the acquisition of Tumi could carry a $2 billion price tag, according to The Wall Street Journal, well above the company's $1.4 billion market capitalization prior to Thursday's surge. In 2015, Tumi reported $548 million of revenue and $63 million of net income. Samsonite is far larger, with 2014 revenue of about $2.4 billion.
Samsonite went public in Hong Kong in 2011 after being taken private in 2007 by a private equity firm. The company is the largest travel luggage company in the world, and a deal for Tumi would boost annual revenue by about 18.5%. Tumi has grown quickly over the past few years, more than doubling annual revenue since 2010, and the company's high-teens operating margins are substantially higher than those of the larger Samsonite.
Now what: If a deal goes through for around $2 billion, Samsonite will be paying a high price for Tumi, nearly 32 times 2015 earnings. At this point, there's no guarantee that a deal will through, but something could be announced as early as this week, according to the WSJ. For Tumi investors, the deal price would likely be above the stock's all-time high, depending on the premium Samsonite is willing to pay.
Timothy Green has no position in any stocks mentioned. The Motley Fool recommends Tumi. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.