SRM seeks to block Countrywide deal

Bank of America’s $4.1bn offer for Countrywide Financial was thrown into doubt on Thursday when a large shareholder in the biggest US mortgage lender said it would vote against the deal. SRM Global Fund, a Monaco-based hedge fund with a 5% stake, said the offer “considerably undervalued” Countrywide. It also plans to ask the SEC to investigate changes in Countrywide’s share price ahead of last month’s offer. The hedge fund, run by UK trader Jon Wood, is leading a similar fight by shareholders of Northern Rock against government plans to sell the stricken UK mortgage lender. SRM said it would approach other large Countrywide shareholders, including Legg Mason, Capital Research and Fidelity, and urge them to vote against the BofA deal. Together with SRM, which is believed to hold closer to 10% of Countrywide via contracts for difference, the top five shareholders control about 37% of the lender’s stock. Tactically, says Lex, SRM’s move could well pay off. At the least, SRM’s entry ought to mitigate the threat of a price cut and could, conceivably, persuade BofA to pay a bit more. Either way, Countrywide still looks set to go. FT Alphaville, meanwhile, reproduces SRM’s statement and asks whether SRM’s Wood has “finally lost his mind”.