Dollar Tree is buying rival discount retailer Family Dollar Stores in a cash-and-stock deal valued at about $8.5 billion. Activist investor Carl Icahn has a big stake in Family Dollar, as does billionaire Nelson Peltz.
Meanwhile, billionaire investor Carl Icahn said he is hopeful more potential buyers will surface for Family Dollar.
"While we continue to believe there are a handful of potential buyers who could realize greater synergies through a combination with Family Dollar and are hopeful that one or more of them will surface as a result of today's announcement, we are extremely pleased with Dollar Tree's intention to acquire Family Dollar in a transaction that values the company at $74.50 per share," said Icahn in a press release. "This is a big win for all shareholders of Family Dollar and yet another validation of the activist investment philosophy in general."
Family Dollar stock soared in premarket trading Monday—even shooting up above the generous 23 percent premium to where shares closed on Friday. By midmorning, it was up more than 21 percent.
Under terms of the deal, stockholders of Family Dollar will receive $59.60 in cash and the equivalent of $14.90 in shares of Dollar Tree for each share they own. The companies put the value of the transaction at $74.50 per share.
Shares of Dollar Tree were 3 percent higher by midmorning.
The action in both stocks indicated the price tag for the deal might be too low, said Jan Kniffen, chief executive officer of J. Rogers Kniffen Worldwide—a retailing research and consulting firm. "There might be more money to be extracted here."
"I was actually surprised when I saw the announcement because when I read it I assumed it was Dollar General and Family Dollar, and it turned out to be Dollar Tree and Family Dollar," Kniffen also said in a "Squawk Box" interview: "We all assumed that [Dollar General-Family Dollar] was the very best match, because those two companies are more alike."