Friday, January 11, 2008

Countrywide Bought: BofA To The Rescue

The gods must be smiling on Angelo Mozilo. I wonder if he got a "get out of jail free" card to help grease the wheels on this deal? Let the layoffs begin!

Oh, and for the record, my 2008 predictions are still in place. How much money does BAC have to lose on this deal so that my prediction educated guess can be right?

Bank of America to buy Countrywide Financial

Paying $4 billion, entirely in stock, to become nation's top mortgage lender
By Alistair Barr & Steve Goldstein, MarketWatch

NEW YORK (MarketWatch) -- Bank of America Corp. said on Friday it's buying Countrywide Financial Corp. for $4 billion, confirming rumors that first emerged Thursday, in a move that will make it the top mortgage lender and loan servicer in the U.S.

The stock-swap deal will put an end to the independence of the troubled California lender headed by Angelo Mozilo, and represents an increase from the Charlotte bank's first investment into Countrywide (CFC).

"We believe this is the right decision for our shareholders, customers and employees," Mozilo, Calabasas, Calif.-based Countrywide's chairman and chief executive, said in a statement.

Terms call for shareholders of Countrywide to receive 0.1822 of a share of Bank of America (BAC) stock in exchange for each share they own.

At Thursday's close, that values Countrywide at $7.16 per share -- lower than the $7.75 closing price after news leaked of a possible deal.

Countrywide shares fell 15%, or $1.22 in pre-open trading Friday, to $6.53.


Perfect Storm said...

Break it up into pieces, keep what is good and dump the rest.

Were right on track for a 50% decline by 2009.

Anonymous said...

I think Mish is right - BoA would have been far better off just buying the pieces they wanted after letting it go into bankruptcy. Blowing 4 billion on it now probably indicates that BoA was "urged" by the Fed to execute a buyout.

Josh said...

This thing still has a long way to go:

"The purchase is expected to close in the third quarter and to be neutral to BofA earnings in 2008 while boosting results in 2009, excluding merger and restructuring costs.

BofA expects $670 million in after-tax cost savings in the transaction, or 11 percent of the expense base of the companies' mortgage operations.

The bank plans to operate Countrywide separately under the Countrywide brand, with integration occurring no sooner than 2009.

BofA is one of the world's largest financial institutions, with more than 5,700 retail-banking offices, 17,000 ATMs and 23 million online-banking users."

Anonymous said...

I'm hearing a lot of chatter saying that this deal will never get done in it's current form. IMHO, CFC stock still winds up being $0 before all is said and done. Also, BAC took an enormous gamble. They could end up being stronger or they can go BK. Not sure which yet.

Anonymous said...

This will be the top three defining factors of just how downreaching this real estate recession is.

Ten years from now scholars will be looking at the years 2005-2010 and look at this buyout and say, "this is how deep this mess went down to"

Anonymous said...

I find it amazing how many lenders are having to pull out of the market. Interesting article. Another one falls victim. One less place for people to get approved.


patski said...

CFC is trading under the buyout price, me thinks it's going to fail...