AG Mortgage Investment Trust Submits Offer to Acquire Western Asset Mortgage Capital Corporation for Implied Price of $9.88 Per Share
Financially Superior Offer with Closing Certainty Represents 18.2% Premium to WMC’s Stock
Book-for-Book Transaction Also Includes Cash Consideration to WMC Stockholders and Establishes a Company that is Meaningfully More Efficient Through Significant Cost Synergies and Earnings Accretion Post-Close
Strong Support from MITT’s External Manager,
Urges WMC’s Board to Promptly Engage with MITT to Accept its Superior Proposal
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Key highlights of MITT’s acquisition proposal, as noted in its letter to the WMC Board of Directors (the “WMC Board”), include:
- WMC and MITT are highly complementary businesses, creating significant business and cost synergies;
- WMC stockholders will receive a portion of the transaction consideration in cash;
- MITT’s proposal provides speed and certainty of transaction closing and avoids accelerating payment of WMC’s convertible debt;
- The proposed transaction eliminates post-closing selling pressure given MITT stockholders already have liquidity; and
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MITT’s stock trades on the NYSE with an observable value with strong support from its external manager,
Angelo Gordon , a leading alternative investment firm with$73 billion of assets under management.
The full text of MITT’s letter to the WMC Board follows. A presentation with additional details regarding MITT’s offer is available at https://www.agmit.com/news-events-presentations/presentations.
Board of Directors
Dear Members of the Board,
I am writing on behalf of the Board of Directors of
Accordingly, MITT is pleased to submit this non-binding proposal to purchase WMC for an implied value of
We believe combining WMC with MITT would result in a focused, residential mortgage REIT with an optimized capital structure and significant growth potential and value-creating opportunities for the combined company’s stockholders. Our complementary core competences in residential mortgage credit would establish an even more efficient and competitive company. Importantly, our proposal provides closing certainty and does not accelerate WMC’s convertible notes, while also benefiting WMC stockholders, particularly given the cash consideration we describe in greater detail below, significant opportunities for cost synergies, and expected earnings accretion following the transaction’s close.
We stand ready to engage meaningfully with the WMC Board of Directors (the “WMC Board”) and request that the WMC Board properly and expeditiously evaluate our offer given its substantial benefits to all stockholders.
Key Terms of the MITT Proposal
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MITT to acquire WMC based on a book-for-book exchange, with each company’s book value adjusted for transaction expenses, pursuant to which each share of WMC common stock would be converted at closing into the right to receive:
- 1.468 shares of MITT common stock pursuant to a fixed exchange ratio, subject to adjustment based on the companies’ respective transaction expenses;1 and
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a cash payment from
Angelo Gordon equal to the lesser of$7.0 million or approximately 9.9% of the aggregate per share merger consideration.
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If the cash consideration to WMC’s stockholders is less than
$7.0 million due to the 9.9% cap,Angelo Gordon will pay the difference to MITT to benefit the combined company by offsetting transaction expenses and/or waiving expense reimbursements payable to MITT’s manager. -
The pro forma combined company to pay a
$7.0 million termination fee due to WMC’s external manager, the break fee, and the cost of WMC’s D&O tail insurance. -
MITT’s manager to waive
$2.4 million of management fees post-close. - MITT’s Board of Directors to be expanded to include up to two additional members from WMC’s independent directors.
- Transaction to not require any financing condition.
For illustration, based on the companies’ respective
We are not aware of any material regulatory impediments to the proposed transaction and believe the transaction can be consummated expeditiously. A copy of our proposed merger agreement is being provided under separate cover, and we will make ourselves available immediately to discuss, negotiate, and finalize its terms.
Superior Benefits of the MITT Proposal
We believe our acquisition proposal offers WMC stockholders substantial upside, while eliminating many risks posed by the TPT transaction. Specifically:
- MITT’s stock trades on the NYSE with an observable value, while TPT’s shares are not listed and have never been valued by public markets through a stock exchange listing.
- There is no post-closing selling pressure given MITT stockholders already have liquidity.
- WMC and MITT are highly complementary businesses, eliminating any need for strategy shift and creating significant business and cost synergies.
- WMC stockholders would receive a portion of the transaction consideration in cash.
- MITT’s proposal provides speed and certainty of closing.
- MITT’s proposal avoids accelerating payment of WMC’s convertible debt.
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MITT has strong support from external manager,
Angelo Gordon , a leading alternative investment firm with$73 billion of assets under management.
A Combined WMC and MITT: A Transformative Transaction
Combining WMC and MITT, two publicly traded REITs, presents a value-enhancing investment opportunity for WMC’s stockholders, which we believe is superior to the TPT transaction.
We urge the WMC Board to consider its fiduciary duty and its contractual rights under the TPT merger agreement and enter into discussions with us to finalize the terms of our proposed superior transaction. We believe doing so would be in the best interests of WMC and all WMC stockholders. Our Board of Directors and external manager have unanimously approved this non-binding proposal and are prepared to work towards an accelerated closing.
We and our advisors stand ready to engage with you and your team as quickly and intensively as possible. We are confident that we will be able to significantly enhance the value of the combined entity and generate substantial long-term value for both WMC and MITT stockholders.
We hope that the WMC Board shares our enthusiasm and look forward to a prompt and favorable reply.
Sincerely yours,
President, CEO, and Member of the Board
Piper Sandler is acting as financial advisor and
About
Additional information can be found on MITT’s website at www.agmit.com.
About
*Angelo Gordon’s (the "firm") currently stated assets under management (“AUM”) of approximately
Additional Information
This communication relates to a proposal which MITT has made for an acquisition of WMC. In furtherance of this proposal and subject to future developments, MITT (and, if a negotiated transaction is agreed, WMC) may file one or more registration statements, proxy statements, tender or exchange offer statements, prospectuses or other documents with the
INVESTORS AND SECURITY HOLDERS OF MITT AND WMC ARE URGED TO READ ANY SUCH PROXY STATEMENT, REGISTRATION STATEMENT, TENDER OR EXCHANGE OFFER STATEMENT, PROSPECTUS AND/OR OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Any definitive proxy statement or prospectus (if and when available) will be delivered to shareholders of WMC or MITT, as applicable. Investors and security holders will be able to obtain free copies of these documents (if and when available) and other documents filed with the
This communication is neither a solicitation of a proxy nor a substitute for any proxy statement or other filings that may be made with the
This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Forward-Looking Statements
This communication may include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements regarding MITT’s offer to acquire WMC, the consideration in the proposed transaction, its expected future performance (including expected results of operations and financial guidance) and the combined company’s future financial condition, operating results, strategy and plans. Forward-looking statements may be identified by the use of the words “anticipates,” “expects,” “intends,” “plans,” “should,” “could,” “would,” “may,” “will,” “believes,” “estimates,” “potential,” “target,” “opportunity,” “tentative,” “positioning,” “designed,” “create,” “predict,” “project,” “seek,” “ongoing,” “upside,” “increases” or “continue” and variations or similar expressions. These statements are based upon the current expectations and beliefs of management and are subject to numerous assumptions, risks and uncertainties that change over time and could cause actual results to differ materially from those described in the forward-looking statements. These assumptions, risks and uncertainties include, but are not limited to, assumptions, risks and uncertainties discussed in MITT’s most recent annual or quarterly report filed with the
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1 Exchange ratio is based on 6.122 million outstanding shares of WMC common stock on a fully-diluted basis. |
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