Bank of America (BAC) / Countrywide (CFC)

January 11, 2008 at 10:43 pm · Filed Under Arbitrage · Comments Off on Bank of America (BAC) / Countrywide (CFC) 

BAC Daily Chart

CFC Daily Chart

I started typing this in the general stock market analysis post, but after it got too long and I realized I may want to look back at this, I moved it to its own post.  BAC finalized the CFC deal, but as mentioned yesterday, it’s not like there’s suddenly a great new play on either company.  It appears to be an all stock deal where CFC holders will receive 0.1822 shares of BAC for each share of CFC, so the arbitrage terms have been set if that’s your cup of tea, i.e. short BAC and go long the equivalent amount of CFC.  The current closing price of 38.50 for BAC would make it worth about 7.01 per share of CFC (38.50 * 0.1822 = 7.01).  For a deal that’s not expected to be done till the third quarter, after including dividends it’s not a very attractive play.  Maybe watch in the future and see if it ever gets to an attractive spread, but for high profile mergers there’s almost never an arbitrage play for retail investors even if they get really creative with the derivatives.