Shares of JB Hi-Fi Limited (ASX: JBH) have surged to a new all-time high today on heightened expectations the group will acquire rival The Good Guys.

Indeed, there has been plenty of talk in the media in recent months about the ongoing sales process for The Good Guys – a leading electronics retailer in Australia. While it appeared that a listing on the ASX via an initial public offer would have been the owners’ first preference, speculation this week has been that JB Hi-Fi is instead on the verge of acquiring the business.

JB Hi-Fi laid that speculation to rest in a market sensitive announcement on Tuesday stating that no such agreement has been reached:

JB Hi-Fi remains in the sale process and continues discussions with The Good Guys in regard to a potential acquisition. JB Hi-Fi has made no decision and nor has it entered into any agreement with respect to an acquisition of The Good Guys. JB Hi-Fi understands that The Good Guys continues to assess an IPO on the ASX.

But that doesn’t appear to have deterred investors, who have bid the shares higher than $31 for the first time in history today. They hit a high of $31.59 earlier in the session, up from a closing price of $28.99 on Friday.

The rumour mill started swirling again this week after The Australian Financial Review’s Street Talk column said The Good Guys’ management team had “practically put pens down” on the IPO idea, and were instead set on following a trade sale process.

This argument does have some weight behind it. After all, it’s certain that the recent failure of Dick Smith would play on the minds of investors if The Good Guys were to list its shares on the ASX, while the market’s underwhelming response to the recent listing of Kogan.com Ltd (ASX: KGN) could also have impacted the level of demand for any shares being issued by The Good Guys.

That said, questions have also been raised about the price JB Hi-Fi would be willing to pay for the business.

While Street Talk hinted that JB Hi-Fi was willing to pay between $850 million and $900 million (representing 8x to 8.5x 2017’s financial year earnings before interest, tax, depreciation and amortisation, or EBITDA) for The Good Guys, JB Hi-Fi’s announcement yesterday does raise doubts regarding that claim.

Reports suggest that JB Hi-Fi has been interested in acquiring The Good Guys in years gone by and walked away from the negotiation table based on the price being offered by The Good Guys’ management. Given the tendency for many acquisitions to destroy value for shareholders, investors should be hopeful that JB Hi-Fi exercises the same level of discipline now as it did back then. Walking away from the opportunity would likely be a better option than overpaying out of desperation.

Still, if a deal does go ahead, JB Hi-Fi could potentially double its group sales, whilst also enhancing its share of the market and improving its position against the likes of Harvey Norman Holdings Limited (ASX: HVN). It’ll be interesting to see how this one plays out over the coming days and weeks.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.