Arohan’s investing life

There is a brewing opposition to Bank of America’s proposed acquisition of Countrywide

First there was a news that the hedge fund SRM Global Fund with its 5.2% stake in Countrywide is opposing the BAC deal . The feeling in the market at that time was SRM may not be able to find any allies in other shareholders

Then comes the new yesterday that Capital World has acquired a 6.1% stake in Countrywide recently. Although Capital World appears to be a passive investor who may or may not side with SRM, they clearly think that the current price is a good value

Today it is revealed that Legg Mason as requested and received approval to raise its stake in Countrywide upto 25%, and its stake has already been increased upto 15% of the company. Additionally, Bill Miller of Legg Mason in a note to investors indicates that he is not in favor of Countrywide sale at the current prices

With many investors now gearing up to oppose the CFC sale to BAC, expect more buying in the stock and gradual appreciation of the stock price. A likely scenario that eventually plays out may include BAC sweetening its offer for Countrywide by possibly offering more BAC stock in exchange for CFC stock. This is getting interesting and even if buying CFC may not work out as a way of getting BAC cheap as suggested in an earlier article (that is if the sale does not go through. If the sale goes through at the current or higher prices than the strategy works beautifully), all the institutional support that is coming back to Countrywide bodes well for a good return on investment on CFC stock itself

If you are invested in CFC I would recommend to stay put. (Of course, there is always a risk of bankruptcy and that is something that you need to weigh)

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