Investor hits BofA deal for lender
A large Countrywide Financial Corp. investor said it opposed Bank of America Corp.’s purchase of the nation’s largest mortgage lender.
Hedge fund SRM Global said in a regulatory filing that it had taken a 5.19% stake in Countrywide, now worth about $209 million.
Countrywide, the hedge fund said, is worth more than the roughly $8.08 a share in stock that Bank of America is paying.
Countrywide’s board and its advisors “should fully explain to shareholders the reasons why they have agreed to recommend the transaction to shareholders at less than half of the company’s book value,” SRM said. “The company is strong and will rapidly return to profit on a stand-alone basis.”
SRM, registered in the Cayman Islands, said it might try to talk to both companies and other Countrywide shareholders.
Countrywide declined to comment.
Bank of America spokesman Scott Silvestri said, “The transaction price was negotiated, and we believe it was fair for both companies.”
Analysts say Countrywide is hard to value given soaring borrower defaults, a deterioration in credit markets, and investigations and lawsuits over its loan practices.
Meanwhile, Bank of America named David Sambol, Countrywide’s second-highest ranking executive, to run the acquiring company’s mortgage business after the merger.
Sambol became Countrywide’s operating chief in September 2006 after the sudden departure of his predecessor, Stanford Kurland.
Bank of America Chief Executive Kenneth Lewis said Jan. 11 that he wanted to retain some senior executives, whom he called “very, very good operators.”
On Tuesday, Calabasas-based Countrywide posted a larger-than-expected $421.9-million fourth-quarter loss, giving it a $1.6-billion loss for the last half of 2007, but Lewis said “everything is a go to complete this transaction.”
Countrywide shares rose 49 cents, or 7.6%, to $6.96 on Thursday. Bank of America rose $2.14, or 5.1%, to $44.35.
Bank of America, based in Charlotte, N.C., expects to close its purchase of Countrywide in the third quarter. Together the companies make 1 in 4 U.S. home loans.
Also Thursday, Florida Atty. Gen. Bill McCollum said his office issued a subpoena this month to Countrywide for documents in a probe of possible unfair and deceptive practices by lenders that offered sub-prime mortgages. Countrywide said it was cooperating with the Florida subpoena.
