Two Harbors Investment and UWM Holdings have two totally different views on what happened last week when the parties met about a possible combination.
The only thing they agreed upon was that UWM did not make a formal offer
As part of this window, Two Harbors delayed the shareholder meeting again, until June 23, and made the demand for any UWM offer to be all cash.
Two Harbors' perspective on the meeting
Two Harbors called for a CEO-to-CEO meeting in person in New York, where it is headquartered. Instead on June 11, Bill Greenberg and Mat Ishbia held a video chat, the Two Harbors letter said.
During the call, Ishbia reportedly raised a number of ideas, including making cash the default consideration or modifying the election to default a subset of stockholders into cash. Another option was to potentially change the exchange ratio, which has stayed static at 2.3328 shares of UWM for each share of Two Harbors.
On Monday morning UWM's common stock opened at $2.46 per share; at this price, the deal has a value of $5.74 per share, less than half of what UWM was offering in cash of $12.50 per share.
But after those early gains, UWM's stock price started falling and as of 3 p.m. eastern time on June 15, it was at $2.35 per share, down 3 cents from the previous close. Two Harbors was at $12.16 per share as of 2 p.m., down 18 cents from end of day Friday.
Greenberg reportedly asked Ishbia to put a specific proposal in writing for consideration. However, supposedly Ishbia said he was not sure any proposal would be forthcoming and he needed to look at this closer.
UWM fires back with its comments
In a response letter that came out after the markets opened, UWM accused Two Harbors of mischaracterizing those discussions.
"The TWO Board is trying to create the impression of reasonableness while simultaneously inventing arbitrary and self-imposed restrictions that are a ruse and impede the opportunities to get the best result for their stockholders," UWM said. "The bottom line is: the TWO Board is only pretending to engage."
UWM said the five-day window was arbitrary and unreasonable in order to finalize a revised proposal. Furthermore, Greenberg supposedly turned down a counter from UWM to come to Michigan during the window.
The stock component is "an added and optional bonus to stockholders, irrespective of the total value to be conveyed and regardless of stockholders' already agreed and unfettered ability to make an election to receive cash," UWM said, claiming its stock price could appreciate from now until the day the deal closes, giving those shareholders a free call option.
UWM said it remains committed to pursuing a deal with Two Harbors and is prepared to
"Make no mistake: the TWO Board knows how to conclude that a proposal would be reasonably expected to result in a superior proposal and how to truly engage — they did it previously while under contract with UWMC," its letter said. "Why can't the TWO Board follow the same process now and commence a true process with us?"
Deal still does not make sense for UWM, analyst says
In a flash note that came out after the Two Harbors' letter but before the UWM response, Keefe, Bruyette & Woods analyst Bose George reiterated his point that an all-cash deal, or even one which is "largely" all-cash, at the current price adds little value to UWM.
"So we think not winning this deal combined with a dividend cut could be a positive for UWMC," George said. In his last note, George raised the likelihood of a UWM dividend cut to help deal with the increased leverage levels.
In his note, George referred to Two Harbors' Friday close of $12.34 per share. This "suggests that the market is not expecting a higher cash bid from UWMC."
CrossCountry is
Two Harbors, because it is structured as a real estate investment trust, must distribute at least 90% of its taxable income as a dividend.
