Is Bank of America’s acquisition of Countrywide in trouble? You wouldn’t think so if you’re looking at the spread between where the shares of the two companies are trading. The spread between the shares and the offering price has narrowed dramatically in the last few days, from a high of nearly 25% to the current 15% gap.
But today the Monaco-based hedge fund SRM Global Fund filed a 13D complaining that the merger plan does not deliver “sufficient value” to Countrywide shareholders. SRM has acquired a 5.19% stake in Countrywide.
Most commentary on the deal has focused on whether Bank of America might back out. It has been described as a “bailout” and Bank of America’s role as that of a “White Knight.” The idea that Countrywide’s shareholders would balk at the deal comes as a surprise.
SRM seems to specialize in troubled home lenders. They also have a major stake in Northern Rock.
SRM 13D [SEC]
Countrywide merger criticized, BoA names mortgage exec [Reuters]
Posted by Anonymosity , Jan 31, 2008 1:13PM
Throw in some Mike's Hard Lemonade, and we have a deal.
Posted by , Jan 31, 2008 2:46PM
Offer up 100% of the equity to SRM, then we'll see how undervalued the deal is...
Posted by anon , Jan 31, 2008 3:03PM
I'm sorry, but when I see "Monaco-based hedge fund" I have difficulty taking it seriously. Not ragging on the Principality, which is a fun place to visit for a day or two, but it doesn't seem particularly conducive to actual work.
Posted by , Jan 31, 2008 3:34PM
I have two questions:
1. Most of the write downs we've been seeing are due to the value of the securities on banks balance sheets declining in value, n'est pas? What about the reversal of gain on sale accounting that the originators were booking so aggressively? Is there much of that going on?
2. Does LOL mean 'lots of laughs' or 'laughing out loud'?
Posted by prince , Jan 31, 2008 3:35PM
Probably own CFC debt, take out their economic interest in the stock, hope to kill the deal and push them into BK and make a nice recovery on the debt.
Posted by quantster , Jan 31, 2008 4:03PM
John Wood of SRM is known to be aggresive like that and he made tons of money for UBS. He used to be based in London as a top trader for GLG before getting implicated in insider stuff and started a HF in Monaco with 2 billion
Posted by quantster , Jan 31, 2008 4:09PM
correction: he was never in GLG nor got fine for insider trading. But he did well at UBS Prop