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Annaly Capital Management, Inc. To Acquire Hatteras Financial Corp. For $1.5 Billion

The following excerpt is from the company's SEC filing.

Strategic Transaction is Mutually Beneficial to Shareholders of Both Companies

Further Enhances the Scale and Diversification of Annalys Investment Platform

Expected to be Accretive to Annalys Book Value and Core Earnings Per Share of Common Stock

Reinforces Annalys Stature as Industry Leader

Hatteras Shareholders to Have a Cash / Stock Election with Aggregate Transaction Consideration to Consist of Approximately 65% Annaly Shares and Approximately 35% Cash

Transaction Expected To Close By End of Third Quarter Of 2016

NEW YORK, NEW YORK and WINSTON-SALEM, NORTH CAROLINA (BUSINESS WIRE) Annaly Capital Management, Inc. (Annaly) (NYSE:NLY) and Hatteras Financial Corp. (Hatteras) (NYSE:HTS) today announced the signing of a definitive merger agreement under which Annaly will acquire Hatteras for consideration to be paid in cash and shares of Annaly common stock, which values Hatteras at $15.85 per share of Hatteras common stock based upon the closing price of Annaly common stock on April 8, 2016. The value of the consideration represents a premium of approximately 24% to the 60-day volume-weighted average price of Hatteras common stock ending on April 8, 2016 and a multiple of 0.85x Hatteras estimated book value per share as of February 29, 2016.

Subject to the terms and conditions of the merger agreement, a wholly-owned subsidiary of Annaly will commence an exchange offer to acquire all outstanding shares of Hatteras common stock. For each share of Hatteras common stock validly tendered in the exchange offer or converted pursuant to the second-step merger described below, Hatteras shareholders may elect to receive: (a) $5.55 in cash and 0.9894 shares of Annaly common stock; (b) $15.85 in cash (the Cash Consideration Option); or (c) 1.5226 shares of Annaly common stock (the Stock Consideration Option). Hatteras shareholders who elect the Cash Consideration Option or Stock Consideration Option will be subject to proration, in each of the exchange offer and the subsequent second step merger, so that the aggregate consideration will consist of approximately 65% of Annalys common stock and approximately 35% in cash. In addition to the above consideration, Annaly would assume the existing notional $287.5 million in Hatteras 7.625% Series A cumulative redeemable preferred stock.

The transactions contemplated by the merger agreement, including the exchange offer and the merger, have been unanimously approved by the Board of Directors of Annaly and unanimously approved by the Board of Directors of Hatteras upon the unanimous recommendation of the Special Committee of the Hatteras Board of Directors, which is comprised entirely of independent directors (the Hatteras Special Committee).

This strategic transaction represents a unique and sizeable value creation opportunity for our shareholders, commented Kevin Keyes, CEO and President of Annaly. With the acquisition of Hatteras, we significantly grow our diversified portfolio and broaden our investment options, further fortifying Annalys position as the market leading mortgage REIT. Wellington Denahan, Chairman of Annaly, added: We are tremendously excited to announce this partnership today. Both Hatteras and Annaly are seasoned veterans in the sector, and we are confident this acquisition strengthens our ability to deliver superior returns to our shareholders over the long-term.

Michael R. Hough, Chairman and CEO of Hatteras, said: We are excited by the opportunity to join the Annaly platform and believe our diversification efforts are greatly enhanced by the industry-leading business Annaly has built. The complementary nature of this transaction should enhance the risk-adjusted value proposition weve always strived for. Jeffrey D. Miller, Lead Independent Director of Hatteras, added: The strategic combination

with Annaly will offer our shareholders increased scale, diversification and liquidity, which we believe will result in higher and more sustainable shareholder value over the long-term.

Transaction Highlights

Benefits to Annaly shareholders

Expands and further diversifies Annalys investment portfolio: