Annaly Capital Management has proposed to purchase the shares of Crexus Investment Corp. it doesn’t already own at a price of $12.50 per share in cash, which it says is a 13% premium to its Friday closing price.
Annaly already owns over 12% of Crexus’ common stock and its Fixed Income Discount Advisory Co. subsidiary serves as the manager of Crexus. Both companies are structured as real estate investment trusts. Annaly invests agency mortgage-backed securities while Crexus is a commercial mortgage lender.
In a press release, Annaly’s chairman and CEO Wellington Denahan, said, “While we remain committed to the agency market, given the current environment, we believe it is prudent to diversify a portion of our investment portfolio. Therefore, we may allocate up to 25% of our shareholders’ equity to real estate assets other than agency MBS.
“A powerful step in this direction is the proposed acquisition of Crexus. We believe that wholly owning the commercial real estate platform we currently manage through FIDAC is complementary to our existing business and return profile and should provide stable and diversified risk-adjusted returns to our shareholders.”
Crexus has not yet responded publicly to Annaly’s offer.
Crexus earned $23 million in 3Q12, down from $40 million in 3Q11. In its earnings release, Kevin Riordan, CEO and president, said, “The weight of Fed involvement in the fixed-income markets is being felt in our markets and credit spreads are tightening, but we believe this will result in an increase in new loan originations and securities issuance. Our pipeline and platform remain active, and we will continue to capitalize on opportunities as they arise.”