Why GMS Stock Crushed It This Week

Key Points

• The company was bought out by a larger peer.

• Although that wasn't exactly a surprise, it did give the shares a double-digit pop at the start of the week.

Lately, GMS (NYSE: GMS) has done very well on the stock market for a company that'll soon cease to be an independent business.

The building products distributor was acquired by a high-profile peer after a brief bidding war, which in combination with several analyst price target bumps gave its shares a real lift. According to data compiled by S&P Global Market Intelligence, they increased by almost 13% in price over the holiday-shortened week.

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A mini bidding war

On Monday, it was announced that a division of SRS Distribution, a subsidiary of DIY goods retailer Home Depot, swooped in to acquire GMS.

Image source: Getty Images.

Previously, GMS had received an unsolicited, all-cash buyout offer from fellow building products supplier QXO. The Home Depot unit's bid of $110 per share for GMS -- also fully in cash -- was essentially an offer it couldn't refuse, as it was far more generous than QXO's $95.20.

Home Depot had been rumored to be sniffing around GMS once QXO's offer was made public, so GMS stock didn't experience that dramatic a pop -- its near-13% rise this week was basically the upside after the Home Depot news was released.

In its press release touting the deal, GMS wrote that "We look forward to providing an even wider breadth of product and service offerings while delivering superior value to our professional contractor customers as part of SRS and The Home Depot family."

Good night and good luck

After the acquisition was announced, several analysts tracking GMS stock raced to update their takes. Not surprisingly, they tended to change their price target to the $110 per share Home Depot is paying.

I'd agree with that. At this point, I don't think another well-capitalized bidder is going to suddenly materialize with a richer offer for GMS. For shareholders of the company, congratulations on the deal, and enjoy your profits.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool has a disclosure policy.