Key Takeaways:
UWM Holdings Corp. on Thursday issued an open letter to Two Harbors Investment Corp. stockholders, reaffirming its $12.50 per share cash offer to acquire the mortgage REIT and urging them to vote against a rival merger with CrossCountry Mortgage that has twice failed to secure approval.
"Your Board is relying on delay tactics that it hopes will wear down stockholders into accepting a less valuable transaction, even though UWMC's superior proposal has been and continues to be on the table," Adam Wolfe, corporate secretary at UWM Holdings, said in the letter.
UWMC's May 11 proposal values Two Harbors at $12.50 per share in cash, or 2.3328 UWMC Class A shares per TWO share for those who elect stock. That compares with CrossCountry's "best and final" offer of $12.00 per share in cash with no stock election option. Both deals include an expected $0.34 per share second-quarter dividend from Two Harbors.
The Pontiac, Michigan-based mortgage lender's renewed push comes after Two Harbors' board twice adjourned special meetings after failing to secure stockholder approval for the CrossCountry transaction. Proxy advisory firms ISS, Glass Lewis and Egan-Jones have all recommended voting against the CCM deal. The next special meeting is scheduled for June 11.
UWMC's Offer vs. CrossCountry's Proposal
UWMC's cash election of $12.50 per share represents a premium of about 4 percent over CrossCountry's $12.00 per share cash offer. The stock election option — 2.3328 UWMC shares per TWO share — provides an alternative that CrossCountry's bid does not offer. UWMC said it is open to adjusting the default election mechanism so that smaller retail stockholders automatically receive whichever is the higher value between cash and UWMC shares.
CrossCountry has called its proposal "best and final" and said it "will not pursue a deal at all costs; there are other strategic alternatives available." UWMC seized on that language, arguing that the best alternative for Two Harbors stockholders is to engage with UWMC's superior bid.
What's at Stake
The outcome will determine whether Two Harbors, a publicly traded mortgage real estate investment trust, combines with the nation's largest wholesale mortgage lender or with CrossCountry, a private mortgage originator. UWMC has been the largest wholesale mortgage lender for 11 consecutive years and is also the largest purchase lender in the country, according to the company.
UWMC said the Two Harbors board has the ability under its agreement with CrossCountry — and the obligation under law — to determine that UWMC's offer is capable of being superior and to engage in negotiations, but has been "consistently reluctant" to do so. The company urged stockholders to vote against the CCM deal on UWMC's blue proxy card and to demand good-faith engagement from the Two Harbors board.
If UWMC's bid succeeds, the combination would create a larger publicly traded mortgage platform with scale advantages in both origination and servicing. If the CrossCountry deal ultimately collapses without a UWMC alternative, Two Harbors would face an uncertain strategic path.
This article is for informational purposes only and does not constitute investment advice.
