Apollo Commercial Real Estate Finance (ARI) has agreed to acquire Apollo Residential Mortgage (AMTG), both New York-based firms announced Friday. The two companies, which are publicly traded, are indirect subsidiaries of Apollo Global Management
ARI, a commercial mortgage originator and investor, will pay $14.59 per share in cash and stock for AMTG, a residential mortgage-backed securities investor.
"This transaction offers AMTG stockholders an opportunity to receive a significant premium to the recent and current trading value of the common stock and, importantly, an opportunity to participate in ARI's future growth through ownership of ARI common stock," said Thomas Christopoul, chairman of the special committee of AMTG's board of directors, in a press release. Headwinds in the residential mortgage REIT sector was the driver for AMTG to consider strategic alternatives, he said.
The deal is expected to close in either the second or third quarter of 2016.
In conjunction with this deal, ARI has agreed to sell $1.2 billion of nonagency RMBS to Athene Holding Ltd., an insurance holding company. The price will be set at a later date. Plus, Athene will provide a short-term $200 million line of credit to ARI to fund the cash portion of the transaction.
"Upon successful closure of the AMTG transaction, ARI intends to redeploy the capital from the transaction to fund ARI's current investment pipeline and pursue attractive new commercial real estate debt opportunities expected to drive earnings growth," said Jeffrey Gault, chairman of ARI's board of directors.
Houlihan Lokey served as financial advisor and Fried, Frank, Harris, Shriver & Jacobson as legal counsel for ARI. Morgan Stanley was financial advisor and Latham & Watkins was legal counsel to AMTG.
