Now it's official! Bank of America who had previously invested $2 Billion in the struggling mortgage lender has now "officially" announced that they will be acquiring Countrywide for a total $4 Billion dollars!From MarketWatch, Mozillo is quoted for saying:
"We believe this is the right decision for our shareholders, customers and employees." -- Mozillo, Chairman and Chief Executive
Though the acquisition/purchase isn't expected to close until the 3rd quarter and though the Countrywide name is expected to stay (this according to a Countrywide employee) the move effectively launches Bank of America into the number (1) one position in mortgage lending! (They will be closing in the 3rd quarter in order to remain neutral to Bank of America's earnings per share in 2008).
What about Countrywide's poor servicing portfolio? What kind of expense will be bared here? Bank of America will be spending an estimated $1.2 billion in additional restructuring charges but it is reported that these expenses have nothing to do with any additional mortgage write-downs. Instead, the $1.2 billion dollar expense is for standard merger costs associated with the transaction.
It is expected that Bank of America and Countrywide will operate separately during 2008 after which time the two companies will be fully integrated (in 2009).
So should the news of the merger be a total shock? Not if you read my article dated in August: Warren Buffet and the Countrywide Crisis - a correlation between the two.
READ ON...
PS. if you liked this article, visit my updates at www.industry-report.com
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Ricardo.... as you stated, it wasn't a shock to hear of this news. The writing has been on the wall for almost 7 to 8 months. I just don't understand how many CW employees could believe the memos that were handed down from corporate, stating that everything is okay. Are some people that blind?