American Capital Agency (AGNC) to Buy Its External Manager
American Capital Agency Corp. AGNC, the mortgage real estate investment trust (“mREIT”) has inked a deal to acquire its external manager American Capital Mortgage Management, LLC from American Capital Asset Management, LLC, a wholly-owned company of American Capital, Ltd. ACAS. Upon completion of the deal, American Capital Agency will be managed internally as a residential mREIT. The acquisition of its external manager is likely to create value for the shareholders of the American Capital Agency in the long run.
Subject to the fulfillment of certain customary closing conditions, this acquisition is expected to close in the third-quarter of 2016. American Capital Agency is expected to pay a total consideration price of $562 million related this deal.
Notably, in first-quarter 2016, American Capital Agency paid $27 million (or $108 million annually) to American Capital as management fees. Upon the completion of this deal, American Capital Agency will not have to pay this amount.
American Capital Agency focuses on leveraged investments in agency MBS. Last month, the company reported first-quarter 2016 net spread and dollar roll income of 52 cents per share (excluding estimated “catch-up” premium amortization benefit) that missed the Zacks Consensus Estimate of 57 cents. The reported figure also came lower than 54 cents earned in the prior quarter.
Presently, both American Capital Agency and American Capital carry a Zacks Rank #3 (Hold).
Some better-ranked stocks in the mREIT space include Capstead Mortgage Corp. CMO and Two Harbors Investment Corp. TWO. Both these stocks hold a Zacks Rank #2 (Buy).
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