Shares of Sanderson Farms (SAFM) rallied in morning trading following a report from The Wall Street Journal on Monday that the company is considering a sale. JPMorgan analyst Ken Goldman told investors in a research note that he would not be surprised if the asking price is more than $200 per share.

SANDERSON STUDYING SALE: Sanderson Farms is studying a sale amid rising demand for chicken, people familiar with the matter told The Wall Street Journal's Jacob Bunge and Cara Lombardo. According to the report, Sanderson is asking Centerview Partners for advice on the potential sale. It has attracted interest from suitors including agricultural investment firm Continental Grain, which owns a smaller chicken processor, the sources noted, adding that the process may not result in a sale. A deal with Continental would merge Sanderson with Wayne Farms, a poultry producer owned by Continental, forming a company that would produce about 15% of the country's chicken meat.

Bunge and Lombardo reported that Sanderson's market value is around $3.5B as of Monday afternoon, and a buyer would be expected to pay a premium to that.

Sanderson previously rejected an unsolicited, $142 per share takeover bid made by Durational Capital Management, as it felt the offer was too low.

ASKING PRICE COULD BE OVER $200: On Tuesday, JPMorgan analyst Ken Goldman raised the firm's price target on Sanderson Farms to $198 from $175 and kept an Overweight rating on the shares after The Wall Street Journal reported that the company is exploring a sale. Goldman recommends continuing to buy Sanderson shares until they get nearer to $200. The analyst believes Joe Sanderson, the company's chairman and chief executive officer, is willing to sell the company and would not be surprised if the asking price is over $200 per share. Goldman doubts the typical 25% premium in the food-at-home group, which implies a $195 per share takeout price, "will cut it in this case."

POSSIBLE DEAL WITH WAYNE: Meanwhile, BofA analyst Peter Galbo maintained a Neutral rating and $180 price target on Sanderson Farms shares, telling investors in a research note of his own that Sanderson Farms is currently the third largest chicken processor in the U.S. with about 10% market share, while Wayne Farms is currently seventh largest with about 5% market share according to industry source Watt Poultry USA. A combined Sanderson/Wayne would still rank third in terms of processing capacity behind Tyson Foods (TSN) and Pilgrim's Pride (PPC), Galbo noted.

PRICE ACTION: In morning trading, shares of Sanderson Farms gained almost 10% to $182.98.