Legg Mason's Bill Miller Comments on Countrywide (CFC), "Surprised" By Sale, Seeks To Raise Stake

February 12, 2008 1:15 PM EST

Legg Mason Value Trust's Bill Miller commented on Countrywide (NYSE: CFC) related to the takeover deal with Bank of America (NYSE: BAC).

Miller said he was "quite surprised" by the company's decision to sell at close to a seven-year low and 30% of book value and under 3x consensus earnings for 2009. The firm said, "What makes the decision puzzling is that the company was seeing solid deposit growth, has no apparent capital problems, was not forced by the regulators to seek a merger partner, and is in sufficiently sound condition to have declared its regular quarterly dividend at the end of January."

Miller noted that his firm recently petition permission to raise its ownership in Countrywide to up to 25%. The permission was granted on Jan 18th, and they have since raised their ownership to 14.9%, from the 11.8% held as of December 31, 2007. Countrywide has a poison-pill in place that prohibits the firm from raising their stake over 15%. The firm indicated they have asked CFC's Board to eliminate the poison pill.

Miller notes that CFC has yet to publish its proxy containing additional information about the deal, so they are unable at this point to decide whether they will vote in favor of the deal or not. They will continue to study the situation carefully.

Miller notes that many companies closely tied to housing and mortgage markets are higher recently as the fed has been cutting rates, but CFC is down 25% related to the deal with BAC.

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