It's all very confusing. SRM Capital Management's Jonathan Wood has blasted Bank of America's (NYSE: BAC) deal to acquire Countrywide Financial (NYSE: CFC) as being grossly inadequate. Legg Mason Value Trust's legendary manager Bill Miller agrees.
And yet the stock isn't doing anything to suggest a better deal is coming. In fact, Wall Street has serious questions about whether the deal will close at all. With credit market worries showing few signs of subsiding, Countrywide shares are trading at discount of more than 20% to the value of the deal -- an unusually large arbitrage spread indicating that investors have their doubts about the deal's future.
Over on SeekingAlpha, Richard Shinnick wonders why Bank of America is doing this deal: "Why are you saving Countrywide? Why take this risk? You can build your own national mortgage network! In fact, you already have one! Why do you need this? What are you thinking?"
I agree, and also question the value of Countrywide's national mortgage network. The company has spent nearly 40 years building a strong network and brand, but you have to think that, financial woes aside, the hugely negative press attention has hurt the company's image. I would argue that the Countrywide name has such a negative connotation as to be worthless. As Warren Buffett has said, "It takes 20 years to build a reputation and 5 minutes to ruin it."
Will the Countrywide Financial deal close? Should it?
Posted Mar 7th 2008 12:50PM by Zac Bissonnette
Filed under: Deals, Bank of America (BAC), Countrywide Financial (CFC)
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Reader Comments (Page 1 of 1)
3-07-2008 @ 1:23PM
desktoparchitecture said...
I am a long time owner of shares of B A and at this point I fail to see why theer board of directors coninues to go ahead with the acquisition of Countrywide. I wish that they would drop this aquirement issue and get back to their function as Bankers.
3-07-2008 @ 7:47PM
MARTI said...
Jonathan Wood and those likeminded jerks are UnAmerican. You go right on Bank of America there will be good results for you. Wall street is being controlled by monsters up and down playing their con games. Big money out of the country is playing our markets and the news broadcast fright and scare for years. We are manipulated with everything lied to down to the food we eat. Common Sense is a rare commodity and greed turns the earth into a hell. Bank of America can save not only Countrywide but thousands of people with a dream of owning a home thru their Integrity a new plan will emerge. The housing market and rentors is way way too expensive anyway. Get Real folks !!! you are creating homelessness and poverty. I am an American born and have seen it happen before my eyes and You Mr. Greed you know who you are....with no common sense are to blame.