Hedge Fund Raps BoA/Countrywide Deal

The acquisition of Countrywide Financial Corp. by Bank of America Corp., Charlotte, N.C., has drawn opposition from SRM Global Fund, a Cayman Islands-based hedge fund that controls 5.19% of Countrywide's stock. In a Securities and Exchange Commission filing, SRM said "the merger agreement does not provide sufficient value to holders of [Countrywide's] common stock." The company also issued a news release saying it will vote against the merger and that the Calabasas, Calif.-based Countrywide is "strong and will rapidly return to profit on a standalone basis." If this is not true, SRM said it wants to know what management did to maximize shareholder value. As the deal now stands, SRM said Countrywide shareholders would get less than $8 dollars per share. But even after the fourth-quarter loss, it maintained that Countrywide still has a book value "in excess of $20 per share, in addition to its substantial franchise value as the leading mortgage business in the United States and its insurance business." It added that it is not surprised that BoA will proceed on the deal because it is paying a substantial discount to book value. SRM also asked the SEC to investigate movements in Countrywide's stock price in the days before the merger was announced.