Another mortgage REIT came close to beating to the punchin acquiring
According to a May 5 filing detailing the background of the pendingdeal, a mortgageREIT with a market capitalization "of comparable size to Hatteras" approachedit in August 2015 with an interest in combining.
Discussions with the interested company progressed during thenext several months. By Jan. 5, a special committee of the Hatteras board had selectedGoldman Sachs & Co. to advise it in its consideration of a merger.
Over the next two weeks, however, the stock market plunged, andHatteras' shares fell from $13.50 on Jan. 6 to $11.15 on Jan. 19. Share prices forcompanies throughout the sector tumbled.
The Hatteras special committee convened a meeting in mid-Januaryand concluded that "a strategic transaction with [the interested company] wouldnot be attractive at such valuations." On Jan. 20, the Hatteras board terminateddiscussions with the company. Discussion of the deal's pricing or valuations hadnot yet occurred.
A week later, Annaly President and CEO Kevin Keyes called HatterasChairman and CEO Michael Hough to set up a meeting. When they met Feb. 11, Keyesraised the possibility of a merger,and on Feb. 18, Annaly sent a presentation to the Hatteras board outlining the strategybehind a transaction between the two companies.
By mid-March, the companies were in negotiations over a finalprice. A preliminary offer from Annaly proposed valuing Hatteras at $15.25 per share,in which Hatteras shareholders would receive $3.81 in cash and 1.09894 Annaly commonshares, or 25% cash and 75% stock.
The companies eventually agreed to a valuation of $15.85, composedof 35% cash and 65% stock. The Hatteras board requested a reduction of the terminationfee to 3%, to which Annaly agreed.
On April 10, the Hatteras board's special committee unanimouslyrecommended the transaction.