The duel over Western Asset Mortgage Capital Corporation between Terra Property Trust and AG Mortgage Investment Trust has run its course, with the real estate investment firm choosing to join the latter option Wednesday.
This means the
"After careful consideration, the board, in consultation with its outside legal counsel and financial advisors, unanimously concluded that entering into the merger agreement with MITT is in the best interest of WMC's stockholders," said James W. Hirschmann III, chairman of WMC's board of directors, in a written statement Wednesday. "This combination will allow our stockholders to realize compelling value and we are excited about what our companies can achieve together."
WMC, the sought after company, had to weigh the pros and cons of the competing offers after AG Mortgage, a publicly traded residential mortgage REIT, became a second suitor in the midst of an already planned merger between WMC and TPT in mid-July.
Prior to AG's involvement, the market reacted poorly to the announcement that Western Asset Mortgage Capital was merging with Terra Property Trust.
AG Mortgage's offer waived $2.4 million of management fees in the first year post-closing and proposed to purchase WMC for an implied value of $9.88 per share, representing an 18.2% premium to WMC's closing share price as of July 12, 2023. WMC deemed this offer superior compared to TPT's.
Terra Property Trust tried to sweeten the pot with a revised counter offer in early August. One of the changes made was giving WMC stockholders $15.96 per share compared to the total $10.60 per share that MITT offered.
However, MITT's offer still outshined Terra Property Trust's. Bonnie Wongtrakool, CEO of WMC, said two factors that solidified the deal were the delivery of immediate cash value to WMC stockholders and the deal allowing stockholders to continue their participation within the combined company.
"With the support of Angelo Gordon's deep credit expertise, resources, and proven track record, we believe MITT is well-positioned to drive long-term value for the combined company in the residential mortgage market," Wongtrakool said. "We are committed to working closely with the MITT team to quickly complete the acquisition and deliver substantial value for our stockholders."
The CEO of TPT said he was "disappointed" that an agreement did not come to fruition with WMC's board of directors.
"Our innovative proposal provided superior value to WMC stockholders in every regard, including higher total and cash consideration, perpetually reduced management fees, greater scale with lower leverage, lower transaction costs, and greater certainty of closing," said Vik Uppal, CEO of TPT, in a written response Thursday. " WMC requested additional changes that we were unwilling to make because they would not have been in stockholders' best interests."
Despite a rocky origination landscape, MITT reported solid earnings in
Overall, the company produced nearly $8.1 million in net income or $3.5 million attributable to shareholders in the second quarter of 2023, compared with net losses of $48.7 million and $53.3 million, respectively, a year earlier. First quarter 2023 equivalents were a positive $12.5 million and $7.9 million.
Its second quarter results also revealed that AG's subsidiary, Arc Home, saw loan funding bounce back on a consecutive-quarter basis to $400 million from $200 million in the seasonally-weak first quarter, when
