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While Bank of America Corp.'s announced acquisition of Countrywide Financial Corp. may see impediments along the way, the potential benefits of the combination could make it a coup for the buyer.
Under the terms of the deal, Countrywide shareholders would receive 0.1822 of a share of Bank of America stock in exchange for each outstanding Countrywide share.
Using Bank of America's Jan. 10 closing price of $39.30 and a Countrywide capital structure consisting of 578,700,245 common shares outstanding as of Nov. 8, 2007, as well as 51,669,443 options -- all of which are out-of-the-money -- with a weighted average strike price of $25.19 as of Dec. 31, 2006, SNL calculates a deal value of approximately $4.1 billion, or $7.16 per share.
Bank of America expects the acquisition to be neutral to its EPS in 2008 and accretive in 2009, excluding merger and restructuring costs. The bank expects $670 million in after-tax cost savings in the transaction, or 11% of the expense base of the two companies' mortgage operations.
"I think it makes good long-term sense," NAB Research analyst...