Countrywide’s shareholders get the right to exchange their stock for .1822 shares of Bank of America stock.
Based on today’s prices for both BofA and CFC that’s actually 20% above CFCs current price. But, this depends on BofA’s share price holding up as well.
However, if the deal falls through and CFC goes bankrupt you get walloped. Also, if BofA’s stock declines 20% you get zero gain.
One strategy might be to buy CFC and sell BofA short, so that you are guaranteed the spread (minus option costs) if the deal goes through.
