Countrywide Merger Still on Track

February 6, 2008 No Comments »


A top U.S. banking regulator told Reuters today that the proposed merger between Countrywide Financial and Bank of America is still believed to be a go.

“As far as I know the deal is still on track,” Comptroller of the Currency John Dugan said at the Reuters Regulation Summit in Washington.

Dugan also noted that the merger/bailout was a positive move in that it helped ease fears in the flagging mortgage industry.

“I do think that was a healthy thing that happened that helped calm markets about one particular significant area of uncertainty,” he added.

Last month, Bank of America agreed to buy Countrywide for $4.1 billion in stock, seemingly rescuing the nation’s top mortgage lender while adding to its own position in the home lending sphere.

However, the deal faces hurdles from a number of groups, including hedge fund SRM Global, who holds a 5.2 percent stake in the company and scores of consumer advocacy groups.

Bank of America shareholders are also opposed to the deal, with three separate class action lawsuits claiming the merger will hurt the bank’s stock and only allow Countrywide to escape liability.

Because of all the uncertainty, shares of Countrywide have traded as much as 20 percent below the deal’s offering price in recent weeks, but have subsequently risen over the last few days.

Analysts generally believe the deal will be finalized, but some think a price renegotiation isn’t wildly unlikely.

Shares of Countrywide, which traded as low as $5.95 last week, were up 17 cents, or 2.58%, to $6.77 in afternoon trading on Wall Street.

(Photo: gnislew)

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