BofA to buy Countrywide for $4B

Announcement of much anticipated deal sends Countrywide shares sharply lower.
By David Ellis

NEW YORK (CNNMoney.com) -- Bank of America said Friday it would purchase embattled mortgage lender Countrywide Financial Corp. for $4 billion in an all-stock transaction.
Wall Street, which embraced speculation about such a deal just a day earlier, was not encouraged about the news as Countrywide (CFC, Fortune 500) shares tumbled 16 percent in pre-market trading.
"We believe this is the right decision for our shareholders, customers and employees," Countrywide Chairman and CEO Angelo Mozilo said in a prepared statement.
As part of the deal, shareholders of Countrywide would receive 0.1822 of a share of Bank of America (BAC, Fortune 500) stock in exchange for each share of Countrywide. The companies said they expect the deal to close in the third quarter.
Last last summer, the pair struck a deal in which Bank of America would provide $2 billion in financing to Countrywide in exchange for a 16 percent stake in the company.
But Countrywide has experienced mounting woes recently as it reported rising delinquencies and foreclosures within its loan portfolio in December and on speculation that Countrywide was planning to file for bankruptcy itself. Countrywide later denied that rumor.
With Countrywide's shares hit hard, there had been talk about Bank of America buying the mortgage lender outright - although such a move could prove treacherous because of Countrywide's troubled loan portfolio.
Bank of America Chairman and CEO Kenneth Lewis suggested that he was aware of the troubles that his firm was taking on, but said acquiring Countrywide was a "rare opportunity" for his company.
"Countrywide presents a rare opportunity for Bank of America to add what we believe is the best domestic mortgage platform at an attractive price and to affirm our position as the nation's premier lender to consumers," Lewis said in a statement.