Bank of America said today it agreed to acquire battered mortgage lender Countrywide Financial in a $4 billion transaction that could help avert one of the biggest collapses from the US housing crisis.
The purchase constitutes another major but risky acquisition for Bank of America Chief Executive Kenneth Lewis, who has spent more than $100 billion through mergers to create the second-largest US bank.
It may provide a lifeline for Countrywide, which has been battered by mounting losses, borrower defaults, and a slew of lawsuits and regulatory investigations into its lending practices, and for the compensation of longtime CEO Angelo Mozilo.
Countrywide's market value was $26 billion less than a year ago.
Shares of Countrywide fell 82 cents, or 10.5 per cent, to $6.93 in pre-market trading, after rising 51.4 per cent yesterday in anticipation of the transaction. Bank of America rose 75 cents to $40.05 in pre-market trading.
Countrywide shareholders would receive 0.1822 of a Bank of America share in exchange for each of their shares.
The transaction values Countrywide at $7.16 per share, a 7.6 per cent discount to the Thursday closing price.