- Strategic Transaction is Mutually
Beneficial to Shareholders of Both Companies
- Further Enhances the Scale and
Diversification of Annaly’s Investment Platform
- Expected to be Accretive to Annaly’s
Book Value and Core Earnings Per Share of Common Stock
- Reinforces Annaly’s 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
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
Annaly’s 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 Annaly’s
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 we’ve 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
Annaly’s investment portfolio: Hatteras’ portfolio, which
consists of agency residential mortgage backed securities,
residential whole loans and mortgage servicing rights is
complementary to Annaly’s existing businesses
- Transaction accretion to Annaly
shareholders: Transaction is expected to be accretive to
Annaly’s book value per share and core earnings in 2016
- Reinforces Annaly’s stature as
industry leader: Acquisition of Hatteras further entrenches
Annaly as the largest, most liquid and diversified mortgage REIT in
the world
- Strong liquidity position: An
enhanced capital base will support the continued growth of all
investment businesses
Benefits to Hatteras
shareholders
- Meaningful premium to Hatteras’
common stock price: 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 based upon
the closing price of Annaly common stock on April 8, 2016
- Benefit from a more diversified
business: Through ownership of Annaly common stock received in
conjunction with the transaction, Hatteras’ shareholders will
benefit from a more diversified investment portfolio; including
agency and non-agency MBS, residential whole loans, mortgage
servicing rights, commercial real estate debt and equity and
corporate credit
- Enhanced scale and access to
capital: With a pro-forma equity base of over $10 billion,
Hatteras’ common shareholders will benefit from the operating
scale, liquidity and capital alternatives of a larger combined
entity
- Enhanced trading liquidity: In
connection with the transaction, Hatteras’ common shareholders will
receive approximately 93.5 million shares of Annaly common stock in
the aggregate. Over the past twelve months, Annaly’s trading volume
has been approximately $87 million per day
- Hatteras shareholders may elect
between cash and stock consideration or a combination of both:
Hatteras shareholders will have an ability to elect between cash
and stock consideration (or a combination of both cash and stock
consideration), subject to proration rules such that the aggregate
transaction consideration will consist of approximately 65% of
Annaly’s common stock and approximately 35% in cash
Prior to closing, each of Annaly and Hatteras will pay its
respective shareholders a pro rata common dividend based on its
last regular quarterly dividend declared prior to closing and the
number of days elapsed since the record date for the most recent
quarterly dividend, as of the day immediately prior to the closing
date.
In connection with the transaction, Annaly entered into 30-month
consulting agreements with four members of Hatteras’ executive
team, including Michael R. Hough and Benjamin M. Hough.
The exchange offer is subject to customary closing conditions,
including the tender for exchange of one share more than two-thirds
(66 2/3%) of all then outstanding shares of Hatteras common stock
when added to any shares of Hatteras common shares owned by Annaly
and its wholly-owned subsidiary. Following completion of the
exchange offer, the parties will promptly effect a second-step
merger without the approval of Hatteras shareholders under Maryland
law pursuant to which all remaining shares of Hatteras common stock
not tendered in the exchange offer will be converted into the right
to receive the same consideration as in the exchange offer, with
the same election options and subject to the same proration rules.
The transaction is expected to close by the end of the third
quarter of 2016.
Wells Fargo Securities and Sandler O’Neill + Partners, L.P.
served as financial advisors to Annaly, and Wachtell, Lipton, Rosen
& Katz served as legal counsel to Annaly. Goldman, Sachs &
Co. served as financial advisor to the Hatteras Special Committee,
DLA Piper LLP (US) served as legal counsel to Hatteras, and Hogan
Lovells US LLP served as legal counsel to the Hatteras Special
Committee.
Conference Call
The Companies will hold a joint conference call on April 11,
2016 at 9:00 A.M. Eastern Time. The number to call is
1-888-317-6003 for domestic calls and 1-412-317-6061 for
international calls. The conference passcode is 2598977. There will
also be an audio webcast of the call on www.annaly.com. If you
would like to be added to the e-mail distribution list, please
visit www.annaly.com, click on Investor Relations, then select
Email Alerts and complete the email notification form.
About Annaly Capital Management, Inc.
Founded in 1997 as a real estate investment trust (REIT), Annaly
is a leading mortgage REIT listed on the New York Stock Exchange.
Annaly's principal business objectives are to generate net income
for distribution to shareholders and preserve capital through the
prudent selection and management of its investments. Since
inception, Annaly has paid over $13 billion in dividends to
shareholders through real estate investments, primarily agency
mortgage-backed securities.
About Hatteras Financial Corp.
Hatteras Financial is a REIT formed in 2007 to own and manage a
portfolio of residential mortgage investments, primarily in
residential mortgage securities, with a focus on those secured by
adjustable-rate mortgage loans on single-family residences.
Forward-Looking Statements
This communication includes forward-looking statements. These
forward-looking statements generally can be identified by phrases
such as “will,” “expects,” “anticipates,” “foresees,” “forecasts,”
“estimates” or other words or phrases of similar import. Similarly,
statements herein that describe the proposed transaction, including
its financial and operational impact, and other statements of
management’s beliefs, intentions or goals also are forward-looking
statements. It is uncertain whether any of the events anticipated
by the forward-looking statements will transpire or occur, or if
any of them do, what impact they will have on the results of
operations and financial condition of the combined companies or the
price of Annaly or Hatteras stock. These forward-looking statements
involve certain risks and uncertainties, many of which are beyond
the parties’ control, that could cause actual results to differ
materially from those indicated in such forward-looking statements,
including but not limited to the ability of the parties to
consummate the proposed transaction on a timely basis or at all and
the satisfaction of the conditions precedent to consummation of the
proposed transaction, including two-thirds of Hatteras’ common
shares being validly tendered into the exchange offer; business
disruption following the merger; and the other risks and important
factors contained and identified in Annaly’s and Hatteras’ filings
with the Securities and Exchange Committee (“SEC”), such as their
respective Quarterly Reports on Form 10-Q and Annual Reports on
Form 10-K, any of which could cause actual results to differ
materially from the forward-looking statements. The forward-looking
statements included in this communication are made only as of the
date hereof. Neither Annaly nor Hatteras undertakes any obligation
to update the forward-looking statements to reflect subsequent
events or circumstances, except as required by law.
Additional Information and Where to Find It
The exchange offer referenced in this communication has not yet
commenced. This communication is for informational purposes only
and is neither an offer to purchase nor a solicitation of an offer
to sell shares, nor is it a substitute for the exchange offer
materials that Annaly and its merger subsidiary will file with the
SEC. At the time the exchange offer is commenced, Annaly and its
merger subsidiary will file a tender offer statement on Schedule
TO, Annaly will file a registration statement on Form S-4, and
Hatteras will file a Solicitation/Recommendation Statement on
Schedule 14D-9 with the SEC with respect to the exchange offer. THE
EXCHANGE OFFER MATERIALS (INCLUDING AN OFFER TO EXCHANGE, A RELATED
LETTER OF TRANSMITTAL AND CERTAIN OTHER EXCHANGE OFFER DOCUMENTS)
AND THE SOLICITATION/RECOMMENDATION STATEMENT WILL CONTAIN
IMPORTANT INFORMATION. HATTERAS SHAREHOLDERS ARE URGED TO READ
THESE DOCUMENTS CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION THAT HOLDERS OF HATTERAS
SECURITIES SHOULD CONSIDER BEFORE MAKING ANY DECISION REGARDING
EXCHANGING THEIR SECURITIES. The Offer to Exchange, the related
Letter of Transmittal and certain other exchange offer documents,
as well as the Solicitation/Recommendation Statement, will be made
available to all holders of Hatteras common stock at no expense to
them. The exchange offer materials and the
Solicitation/Recommendation Statement will be made available for
free at the SEC’s website at www.sec.gov. Additional copies may be
obtained for free by contacting Annaly’s Investor Relations
department at 1-888-8Annaly (1-888-816-6159).
In addition to the Offer to Exchange, the related Letter of
Transmittal and certain other exchange offer documents, as well as
the Solicitation/Recommendation Statement, Annaly and Hatteras file
annual, quarterly and current reports and other information with
the SEC. You may read and copy any reports or other information
filed by Annaly and Hatteras at the SEC public reference room at
100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference
room. Annaly’s and Hatteras’ filings with the SEC are also
available to the public from commercial document-retrieval services
and at the website maintained by the SEC at http://www.sec.gov.
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