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Annaly (NLY) Closes MTGE Merger, Completes Exchange Offer

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Annaly Capital Management, Inc. NLY recently announced the completion of the pending exchange offer for all outstanding shares of common stock of MTGE Investment Corp. MTGE.

Specifically, 34.6 million shares, representing 75.6% of MTGE's shares, have been tendered as of the exchange offer deadline.  

In accordance with the terms of the exchange offer and applicable law, Annaly will pay $9.82 in cash and 0.9519 Annaly shares to holders to 5,739,769 MTGE shares, who have opted for mixed consideration.

Further, holders of 5,462,059 shares have elected to receive the all-cash consideration of $19.65 per share of MTGE common stock. Lastly, MTGE common stockholders, with the remaining 23,430,939 shares, have chosen to receive the all-stock consideration. Subject to 62% proration rate, they will receive 1.9037 shares of Annaly per share of MTGE common stock for shares that were accepted for the all-stock election. Additionally, for each share not accepted in the all-stock election due to proration, they will receive $19.65 in cash.

Also, the company announced the completion of the second step of the merger, wherein it cancelled MTGE shares which were not tendered in the exchange offer, converting those into rights to receive merger consideration. Holders of the cancelled shares can elect any form of merger consideration, similar to the ones offered to holders who tendered in the exchange offer.    

Through the second-step merger, Annaly has completed the acquisition of MTGE, the latter becoming a wholly owned subsidiary of the former. Notably, this buyout is a strategic fit, as it will provide further scale and diversification options to the company’s investment platform, increasing the number of options to 37. Moreover, Annaly will likely have 27% of its capital allocated to credit assets. This is anticipated to fortify the company’s capital base and support its long-term growth.

Also, it is accretive to the company’s 2018 core earnings per common share. In fact, the stock has seen the Zacks Consensus Estimate for 2018 earnings per share being revised 2.6% upward in two months’ time. 

Annaly carries a Zacks Rank #2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Nonetheless, shares of the company have inched up 0.1% as compared with the industry’s rise of 6% over the past six months.


Other Key Picks

Other similarly-ranked stocks in the same space include Starwood Property Trust, Inc. STWD, Redwood Trust, Inc. RWT and Sutherland Asset Management Corp. SLD. All three stocks carry a Zacks Rank of 2, at present.

Starwood Property’s Zacks Consensus Estimate for 2018 earnings per share remained unchanged to $2.19 over the past 60 days. Its shares have gained 5.3% in the past six months.

Redwood’s earnings per share estimates for the current year remained unchanged at $1.78 in the past month. The stock has rallied 9.4% over the past six months.

Sutherland’s earnings per share estimates for 2018 remained unchanged at $1.75 over the past month. Its shares have appreciated 13.8% in six months’ time.

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