BofA to Buy Countrywide
Updated from 10:37 a.m. EST
The deal values Countrywide shares at $7.16 per share, a 40% premium to where shares were trading before a Wall Street Journal report broke Thursday, but below Countrywide's Thursday close of $7.75. Under the terms of the agreement, shareholders of Countrywide would receive 0.1822 of a share of Bank of America stock in exchange for each share of Countrywide. The deal is expected to close in the third quarter.
Moody's Investors Service warned it may cut its rating on BofA's credit on Friday. Fitch Ratings affirmed its negative outlook for BofA and placed Countrywide on ratings watch positive. Standard & Poor's also put Countrywide on credit watch positive, removing it from its credit watch negative list.
In afternoon trading, Countrywide was slumping nearly 17% to $6.46. Bank of America was down fractionally to $39.16.
Calabasas, Calif.,-based Countrywide has been beset by rumors of a Chapter 11 bankruptcy filing. BofA already owned a 16% stake in the firm.
On Wednesday, Countrywide revealed that foreclosures had doubled to 1.4% of unpaid principal at its key servicing units and that late payments were ratcheting up as well. The news gave investors the sense that matters for the company could get even worse than they'd already become since the subprime collapse began last year.
Countrywide Bailout's Good Biz for BofA
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV