By Saabira Chaudhuri
Annaly Capital Management Inc. (NLY) has offered to buy all the
shares in Crexus Investment Corp. (CXS) it doesn't already own in a
cash deal that values the commercial real-estate investor at about
$958 million as Annaly looks to diversify its investments.
"While we remain committed to the agency market, given the
current environment, we believe it is prudent to diversify a
portion of our investment portfolio," Annaly Chief Executive
Wellington Denahan said. "Therefore, we may allocate up to 25% of
our shareholders' equity to real estate assets other than agency
mortgage-backed securities."
Annaly is offering $12.50 for each Crexus share, a 13% premium
over Friday's closing price. Crexus has a total of about 76.6
million shares outstanding, of which Annaly holds about 12.4%.
Crexus acquires, manages and finances, directly or through its
subsidiaries, commercial mortgage loans and other commercial real
estate debt, commercial mortgage-backed securities and other
commercial real estate related assets. It aims to generate income
for investors from the spread between the yields on its investments
and the cost of borrowing to finance their acquisition. Meanwhile,
Annaly aims to generate income for investors from its investment
securities and from dividends it receives from its
subsidiaries.
Annaly said that given its subsidiary--Fixed Income Discount
Advisory Co.--manages Crexus, and two employees of FIDAC are on
Crexus's board, it expects the Crexus board will create a special
committee consisting entirely of directors who are independent of
Annaly to consider its proposal.
In a letter dated Nov. 9, Annaly detailed its offer and also
said "it has instructed the applicable FIDAC employees who are
responsible for managing Crexus to provide detailed confidential
information about Crexus and its assets and liabilities to the
special committee and its advisers."
Last month, Annaly named Ms. Denahan co-chief executive in order
to allow then CEO Michael A.J. Farrell to focus on being treated
for cancer. Mr. Farrell passed away later in October.
And last week, the company said it had swung to a third-quarter
profit amid higher realized gains on investments, although
per-share earnings markedly missed Wall Street estimates.
Meanwhile, Crexus recently reported that its third-quarter earnings
dropped 43%. However, results beat estimates.
Shares of Annaly closed Friday at $14.98 while those of Crexus
closed at $11.10. Both stocks were inactive in recent premarket
trading.
Write to Saabira Chaudhuri at saabira.chaudhuri@dowjones.com
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