Bank of America to buy Countrywide
WASHINGTON (AP) - June 5, 2008 The Fed board approved the deal in a 32-page order issued
Thursday. Countrywide had said previously that it will hold a
special meeting of shareholders on June 25 to approve the proposed
sale.
In its order, the Fed board said that after the proposed deal
Bank of America would remain the largest depository institution in
the country, controlling approximately $773.4 billion in deposits,
which represent 10.9 percent of total insured bank deposits in the
country.
When the deal was first announced in January, Bank of America
said it would pay about $4 billion in an all-stock deal for
Countrywide, exchanging 0.1822 shares of Bank of America for each
share of Countrywide outstanding.
In recent months, some analysts have speculated that the deal
may be completed at a lower price because of further deterioration
in the mortgage market and a continued rise in mortgage
delinquencies and defaults.
Experts have said that the deterioration of the mortgage market
and Countrywide's loan portfolio could lead to costly write-downs
and create a drag on Bank of America's earnings.
But on Monday, Ken Lewis, the chief executive of Bank of
America, told analysts on a conference call that he believed buying
Countrywide was still a good deal even though the housing market
had continued to falter since the deal was announced.
Lewis said he believed that housing conditions would improve by
early next year. He said that Countrywide and its professional
sales force would give the bank a boost as it pushes to increase
market share in the mortgage sector.
In a statement commenting on the Fed decision, Bank of America
said that it expected the sale to close in the July-September
quarter.
"This transaction represents a rare opportunity for Bank of
America to significantly gain market share in the mortgage
business, allowing it to expand in a cornerstone financial
product," Lewis said in a statement.