trending Market Intelligence /marketintelligence/en/news-insights/trending/49fy3i7v0qza-gihvht2jg2 content esgSubNav
In This List

MTGE eyed AGNC as potential acquirer prior to inking deal with Annaly

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook

Blog

Banking Essentials Newsletter 2021: December Edition


MTGE eyed AGNC as potential acquirer prior to inking deal with Annaly

MTGE Investment Corp.'s board of directors was looking at AGNC Investment Corp. as a logical acquirer before agreeing to a proposal from Annaly Capital Management Inc.

The board saw AGNC Investment as a likely buyer given that it is the parent company of MTGE's external manager, MTGE Management LLC. Also playing a role in AGNC being a candidate to acquire MTGE Investment was a termination fee of approximately $42 million that would have to be paid if the company dissolved its management relationship. That fee could affect the price any acquirer might pay compared to AGNC.

According to an SEC filing, a special committee on April 2 instructed MTGE Investment's financial adviser, Barclays, to reach out to prospective acquirers, including AGNC. Annaly had already offered to acquire MTGE's capital stock, based on 95% of the book value of MTGE Investment's common shares, with a mix of cash and common shares. It was also willing to pay the termination fee.

In an April 9 meeting, Barclays made a presentation to the special committee comparing Annaly's proposal to a hypothetical acquisition by AGNC. Both concluded that AGNC was a logical acquirer that could pay a higher price. However, Annaly increased its offer to approximately 98.0% of the book value, in cash or with a stock component, the next day. It was also willing to pay the termination fee and up to $20 million of additional transaction expenses.

Barclays again contacted AGNC, as well as two major real estate investment trusts, which did not make serious offers.

On April 12, AGNC offered to buy all of MTGE Investment's common shares at 95% of book value, with a consideration mix of 20% cash and 80% AGNC common shares. The special committee considered Annaly's proposal to be more favorable to shareholders.

AGNC expressed willingness to raise its price to 96.0% to 96.5% of book value the following day, but Barclays was then instructed to negotiate an exclusivity agreement with Annaly, which was struck April 16.

AGNC came back with an increased proposal of 98.25% of book value at 20% cash and 80% common shares on April 26, but neither the MTGE special committee nor its advisers could engage because the exclusivity agreement was extended the day before.

On April 29, Annaly raised its proposal to 100% of book value based on a consideration mix of 50% cash and 50% Annaly common shares. The $900 million deal was publicly announced May 2.