After resisting negative housing and consumer reports Tuesday with a minor decline, Deal Stocks and the broader market finally succumbed Wednesday to additional pessimistic economic reports as the Dow Jones Industrial Average lost 109.74 points to close at 12,422.86. Investors pulled back on U.S. Commerce Department reports for February that durable goods orders declined and new home sales slid.
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One tidbit of positive housing-related news managed to surface Wednesday but did nothing to help boost shares of ailing home lender Countrywide Financial Corp. Its shares fell 3.98% to $6.03 per share, despite the release of the weekly Mortgage Banker's Association report that mortgage applications increased 48.1% on strong refinancing demand. Bank of America Corp. has said its $4 billion all-stock acquisition of Countrywide is on plan in the face of Wall Street Journal reports earlier this month. The reports state the Federal Bureau of Investigation is studying whether the lender misrepresented its financial state or the condition of its mortgages and whether it deliberately issued loans to borrowers that did not have the financial means to pay them.
Clear Channel Communications Inc. saw the sharpest decline among stocks involved in pending deals as it fell 17.48% to close at $26.87 per share. The $25 billion buyout of Clear Channel by Thomas H. Lee Partners LP and Bain Capital LLC was expected to close immediately after the end of the debt marketing period on March 25. However, the lending syndicate funding the buyout balked because it would be forced to book several billion dollars in write-downs as the debt will have to be sold at a discount.
Meanwhile, the other radio deal was one of the few bright spots amongst Deal Stocks. Just two days after XM Satellite Radio Holdings Inc. logged double-digit gains on news that the Department of Justice unconditionally approved the $13 billion merger between it and Sirius Satellite Radio Inc., its shares Wednesday fell 4.52% to close at $12.89, and Sirius recorded a 2.27% decline to close at $3.02 per share. The merger still awaits approval from the Federal Communications Commission. - Michael Rudnick
