- 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
NEW YORK & WINSTON-SALEM, N.C.--(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 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.
View source version on businesswire.com: http://www.businesswire.com/news/home/20160411005491/en/
Annaly Capital Management, Inc.
Investor Relations
1-888-8Annaly
www.annaly.com
Source: Annaly Capital Management, Inc.