SRM Global Fund, founded by Jonathon Wood, is seeking to stop the merger between Bank of America (BAC) and Countrywide Financial (CFC). In a statement released by SRM, a company spokesperson said: “We strongly believe that the terms of the proposed merger with Bank of America are contrary to the interests of the Company’s shareholders.”
SRM Global filed a Schedule 13-D with the SEC today. The company claims that the book value of the shares of CFC are $20.00 a share as of December 31, 2007. SRM owns 5.19% of Countrywide. They would receive 0.1822 shares of B of A for every share of CFC they own. The SEC filing indicates that the company may engage the boards of directors of the companies in discussions regarding the proposed merger.
As soon as I saw this story, I was reminded of Bob Barnard‘s Post on Hedge Funds Using Litigation to Exert Influence over Companies. By filing this SEC 13D, SRM is indicating its intent to stop the deal with Bank of America. Will SRM resort to litigation?
If SRM is not satisfied by its talks with management, it may choose to resort to the courts for reprieve (this is pure speculation on my part based on Bob’s earlier post). If they decide to resort to litigation, they will likely file a shareholder’s derivative suit against countrywide and seek a preliminary injunction and temporary restraining order to stop the deal.
It is clearly too early to tell, but this might be a foreshadowing of a few of the hurdles B of A will have to overcome in order to complete the merger.