Walter Energy Rises on Deal Speculation
Shares of Walter Energy (NYSE: WLT) jumped on Friday on speculation that the company could be a target of BHP Billiton (NYSE: BHP). Shares of Walter climbed more than five percent and were trading near $30.04. The company has refused to comment on the market rumors, and currently there is little reason to believe the speculation. The stock, however, is attracting heavy volume with around seven million shares trading hands versus a three month daily average of 3.5 million.
Nevertheless, BHP certainly is a potential suitor for the company given its leading position in global natural resources. Furthermore, BHP has been active in the U.S. energy market and acquired independent oil and gas company Petrohawk Energy in June 2011. Walter is primarily a coal company.
The stock has been crushed in 2012 as a result of declining fundamentals in the coal business which has been hurt by the prevalence of cheap and clean natural gas. Year-to-date, Walter has lost more than 50 percent of its value.
At current levels, the company has a market cap of just $1.88 billion compared to BHP's massive $116 billion valuation. Without question, BHP would have little problem making an offer for Walter, but at this point the rumors simply cannot be substantiated and buyout chatter is notoriously unreliable.
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