Tom Reese/Paul Rubillo, Dividend.com
Australian mining company BHP Billiton Limited (BHP) said Monday that it is dropping its bid to acquire fellow mining company Rio Tinto plc (RTP).
The huge announcement sent Rio Tinto stock plummenting in early trading Tuesday, dropping over 40 points, or over 28%.
BHP Billiton had announced its all-share offer for Rio Tinto last November, when Rio Tinto's market cap hovered around $193 billion. RTP is now valued at around $40 billion.
BHP cited numerous reasons for dropping its bid for the London-based mining company, including sharply lower metal prices, frozen credit markets, a global recession, divesting issues, and regulatory difficulties.
The Bottom Line
This news should come as no surprise to investors following the recent economic meltdown. The current business environment is simply not conducive to costly acquisitions, and this deal was proposed during a commodities boom which has since turned to bust.
We had downgraded BHP stock from our ''Recommended'' list on Jul. 17, at a price of $71.55. BHP stock closed last night at $33.42 per share. Rio Tinto's slide has been even more dramatic -- we downgraded RTP from our ''Recommended'' list on Jul. 24, at a price of $386.50. RTP closed last night at $145.99 per share.
Neither BHP nor RTP are recommended at this time, both holding a Dividend.com Rating of 3.0 out of 5 stars.
Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.
