Annaly Capital (NLY) to Acquire CreXus (CXS) for $13/Share

January 31, 2013 6:31 AM EST
Annaly Capital Management, Inc. (NYSE: NLY) has reached a definitive agreement with CreXus Investment Corp. (NYSE: CXS) to acquire for $13.00 per share in cash (plus a payment in lieu of a prorated dividend) all the shares of CreXus that Annaly does not currently own.

CreXus has approximately 76,630,528 shares of common stock outstanding, of which Annaly holds 9,527,778 shares, or approximately 12.4%. The transaction values CreXus at $996 million and represents a total consideration paid by Annaly of $872 million.

The merger agreement has been approved by the CreXus Board of Directors, acting in accordance with a unanimous recommendation by a Special Committee of the CreXus Board consisting entirely of directors who are not employees of Annaly or any of its subsidiaries, including Fixed Income Discount Advisory Company (“FIDAC”), a wholly owned subsidiary of Annaly that manages CreXus under a management contract. Under the terms of the merger agreement, Annaly will make a tender offer for all outstanding shares of common stock of CreXus it does not already own at $13.00 per share in cash, plus a cash payment per share to reflect a pro-rated quarterly dividend for the quarter in which the tender offer is closed. If a majority of the shares that are not owned by Annaly or its affiliates are properly tendered and not withdrawn, Annaly will purchase the tendered shares and will complete the acquisition of CreXus through a merger, by which CreXus will become a wholly owned subsidiary of Annaly and CreXus shareholders who do not tender their shares in response to the tender offer will receive the same consideration they would have received if they had tendered their shares.

Under the Merger Agreement, Annaly’s tender offer will not begin until after a 45 day period during which CreXus will be able to seek alternate purchasers who would be willing to purchase control of CreXus or its assets on terms that the Special Committee determines to be more favorable to CreXus and its stockholders than those on which Annaly has agreed to purchase the CreXus shares it does not own.

The announced transaction follows a proposal Annaly made on November 9, 2012 to acquire all the CreXus shares it does not already own for $12.50 per share. The increase in the price Annaly will pay resulted from negotiations between Annaly and the Special Committee of CreXus directors.

The price of $13.00 per share in cash represents approximately a 17.1% premium both to CreXus’ last reported share price on November 9, 2012, the last trading day before Annaly’s announcement of its proposal to acquire all the CreXus shares it does not already own, and to the weighted average trading price of CreXus shares during the 30 trading days ended on November 9, 2012. The $13.00 price represents approximately a 9% premium to CreXus’ common stock book value per share on September 30, 2012 and a 7% premium to its reported fair value per share as of that date. The merger agreement does not contain any financing condition but does contain customary conditions to the obligations to purchase the shares tendered in response to the tender offer. Annaly’s right to accept the tendered shares or to do the merger is conditioned on a majority of the shares not owned by Annaly or its affiliates being properly tendered in response to the tender offer and not withdrawn.


BofA Merrill Lynch is acting as financial advisor and K&L Gates LLP is acting as legal advisor to Annaly in connection with this transaction.

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