By Lauren Pollock
Real estate investment trust Annaly Capital Management Inc.
(NLY) reached a deal to acquire the remaining shares of CreXus
Investment Corp. (CXS) that it doesn't already own after raising
its offer price and valuing the commercial property investor at
$996 million.
The offer, worth $13 a share in cash, is up 50 cents from its
November bid and comes after negotiating with a special committee
of CreXus directors. It marks a 17% premium to CreXus' share price
ahead of the original offer.
The acquisition would diversify the portfolio of Annaly, which
already holds a 12% CreXus stake, from the government-supported
bonds it has relied since its inception.
"This transaction represents a significant step toward Annaly's
commitment to investing directly in commercial real estate assets,"
Chief Executive Wellington Denahan said. "This transaction is part
of a broad evolution of our capital allocation strategy.
The deal, which will be conducted through a tender offer and has
the support of CreXus's board, will immediately add to earnings.
CreXus will have 45 days to seek higher offers.
Agency mortgage real estate investment trusts like Annaly have
been under pressure since the Fed in September extended its
low-rate policy to 2015 and began an open-ended campaign to
purchase agency mortgage bonds, accelerating the yield drop.
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. Like Annaly, it generates
profits from the spread between the yields on its investments and
the cost of borrowing to finance their acquisition.
"The Special Committee is very pleased to have reached a
definitive agreement with Annaly that we believe provides
compelling value to CreXus stockholders. We also look forward to
exploring what alternatives might be available to us during the
"go-shop" period, as permitted by the terms of our agreement," said
Nancy Jo Kuenstner, chairman of the special committee at
CreXus.
Both stocks were inactive premarket. CreXus closed Wednesday at
$12.50 and is up 11% over the past three months, while Annaly
closed at $14.95 and is down 7.4%.
Write to Lauren Pollock at lauren.pollock@dowjones.com
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