Monday, June 2, 2008
Countrywide Shareholders To Vote On BofA Deal
Calabasas, CA based Countrywide Financial Corp. (NYSE: CFC) stockholders will vote on June 25th at a special meeting on whether to ratify the $4 billion acquisition proposal from Charlotte, NC based Bank of America Corp. (NYSE: BAC).
The meeting will take place at 9:00 am PDT in the Learning Center Auditorium at Countrywide's corporate headquarters, located at 4500 Park Granada, Calabasas, California.
The Countrywide board of directors has fixed the close of business on April 28, 2008 as the record date for the Special Meeting. Only Countrywide stockholders of record at that time are entitled to notice of, and to vote at, the Special Meeting, or any adjournment or postponement of the Special Meeting. In order for the merger to be approved, the holders of at least a majority of the Countrywide shares outstanding and entitled to vote thereon must vote in favor of approval and adoption of the Agreement and Plan of Merger, dated as of January 11, 2008, by and among Countrywide Financial Corporation, Bank of America Corporation and Red Oak Merger Corporation. Here's the full press release from Countrywide.
Also, Bhattiprolu Murti, MarketWatch, reports that the SEC declared effective a registration of 132.8 million shares of Bank Of America Corp. to be issued under the company's proposed merger with Countrywide Financial Corp. The merger is an all-stock deal, with Countrywide shareholders set to receive 0.1822 share of Bank of America stock in exchange for each Countrywide share.
In a related development, Countrywide settled three shareholder lawsuits which accused Countrywide directors in February of breaching their fiduciary duty by approving the proposed sale on unfair and inadequate terms. As part of the settlement, Countrywide agreed to disclose details of merger negotiations, including the bank's initial $2 billion investment in non-voting convertible preferred security, according to court documents filed Wednesday in Delaware Chancery Court in Wilmington.
Background: In August 2007, BofA invested $2 billion for a 16% stake in Countrywide. In the second week of January, amidst reports of Countrywide Corp.'s imminent bankruptcy, BofA made a $4 billion buyout offer to Countrywide. The plan, on paper at least, was to seperate Countrywide's banking and mortgage lending businesses, with BofA taking over the banking side, and then either running the mortgage lending side as a seperate entity using the existing Countrywide management or completely spinning it off. This would, of course, have had teh additional advantage of saving BofA's initial $2 billion investment.
Unfortunately, the plan doesn't seem to be panning out as expected. The primary reason for this being a stunning misjudgment by BofA about the depth of Countrywide's problems, both financial and legal. I have explained previously why I thought that the deal might be about to collapse, and RGEMonitor's Nouriel Roubini recently wrote an article (subscription required)which further expands on this, touching on the impact of a failed Countrywide-BofA deal, and the resultant Countrywide bankruptcy filing. Indeed foreclosures at CFC doubled to 1.44% of unpaid principal from last year; late payments advanced to 7.2% of unpaid balances from 4.6%; Countrywide's bank holds $61bn in deposits by end 2007, has already borrowed more than $51 billion from the Federal Home Loan Bank system and is now maxed out in its ability to borrow further. But in the short run the collapse of Countrywide alone (by far the biggest US mortgage lender) risks having systemic effects on financial markets, credit markets, credit derivative markets and equity markets.
To make matters worse, the FBI is investigating Countrywide for possible securities fraud to see whether officials misrepresented the company's financial position and the quality of its mortgage loans in securtities filings. And shareholders, like the Arkansas Teacher Retirement System, have filed lawsuits which allege all manner of improprieties at Countrywide, including insider trading among executives, breach of fiduciary duties, corporate waste and misleading of investors.
The meeting will take place at 9:00 am PDT in the Learning Center Auditorium at Countrywide's corporate headquarters, located at 4500 Park Granada, Calabasas, California.
The Countrywide board of directors has fixed the close of business on April 28, 2008 as the record date for the Special Meeting. Only Countrywide stockholders of record at that time are entitled to notice of, and to vote at, the Special Meeting, or any adjournment or postponement of the Special Meeting. In order for the merger to be approved, the holders of at least a majority of the Countrywide shares outstanding and entitled to vote thereon must vote in favor of approval and adoption of the Agreement and Plan of Merger, dated as of January 11, 2008, by and among Countrywide Financial Corporation, Bank of America Corporation and Red Oak Merger Corporation. Here's the full press release from Countrywide.
Also, Bhattiprolu Murti, MarketWatch, reports that the SEC declared effective a registration of 132.8 million shares of Bank Of America Corp. to be issued under the company's proposed merger with Countrywide Financial Corp. The merger is an all-stock deal, with Countrywide shareholders set to receive 0.1822 share of Bank of America stock in exchange for each Countrywide share.
In a related development, Countrywide settled three shareholder lawsuits which accused Countrywide directors in February of breaching their fiduciary duty by approving the proposed sale on unfair and inadequate terms. As part of the settlement, Countrywide agreed to disclose details of merger negotiations, including the bank's initial $2 billion investment in non-voting convertible preferred security, according to court documents filed Wednesday in Delaware Chancery Court in Wilmington.
Background: In August 2007, BofA invested $2 billion for a 16% stake in Countrywide. In the second week of January, amidst reports of Countrywide Corp.'s imminent bankruptcy, BofA made a $4 billion buyout offer to Countrywide. The plan, on paper at least, was to seperate Countrywide's banking and mortgage lending businesses, with BofA taking over the banking side, and then either running the mortgage lending side as a seperate entity using the existing Countrywide management or completely spinning it off. This would, of course, have had teh additional advantage of saving BofA's initial $2 billion investment.
Unfortunately, the plan doesn't seem to be panning out as expected. The primary reason for this being a stunning misjudgment by BofA about the depth of Countrywide's problems, both financial and legal. I have explained previously why I thought that the deal might be about to collapse, and RGEMonitor's Nouriel Roubini recently wrote an article (subscription required)which further expands on this, touching on the impact of a failed Countrywide-BofA deal, and the resultant Countrywide bankruptcy filing. Indeed foreclosures at CFC doubled to 1.44% of unpaid principal from last year; late payments advanced to 7.2% of unpaid balances from 4.6%; Countrywide's bank holds $61bn in deposits by end 2007, has already borrowed more than $51 billion from the Federal Home Loan Bank system and is now maxed out in its ability to borrow further. But in the short run the collapse of Countrywide alone (by far the biggest US mortgage lender) risks having systemic effects on financial markets, credit markets, credit derivative markets and equity markets.
To make matters worse, the FBI is investigating Countrywide for possible securities fraud to see whether officials misrepresented the company's financial position and the quality of its mortgage loans in securtities filings. And shareholders, like the Arkansas Teacher Retirement System, have filed lawsuits which allege all manner of improprieties at Countrywide, including insider trading among executives, breach of fiduciary duties, corporate waste and misleading of investors.
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