Annaly Capital Management, Inc. Announces Agreement to Internalize Management
February 12 2020 - 4:15PM
Business Wire
- Transaction achieves greater alignment of interests between
management and shareholders
- Furthers Annaly’s commitment to robust governance practices
and enhances disclosure and transparency
- Annaly agreed to acquire its external manager for a nominal
cash purchase price and no termination fee
- Internalized structure expected to provide greater operating
flexibility
- Internalization expected to close during the second quarter
of 2020
Annaly Capital Management, Inc. (NYSE: NLY) (“Annaly” or the
“Company”) today announced the signing of a definitive agreement
pursuant to which Annaly will acquire its external manager, Annaly
Management Company LLC (the “Manager”), and transition from an
externally-managed REIT to an internally-managed REIT (the
“Internalization”). The Internalization was negotiated and
unanimously recommended by a special committee of Annaly’s Board of
Directors (the “Board”) comprised entirely of independent directors
(the “Special Committee”) and unanimously approved by the
independent members of the full Board. Pursuant to the agreement
(the “Internalization Agreement”), the Company will acquire the
equity interests of the Manager and its affiliates, all of which
are owned by members of Annaly’s senior management team, for a
nominal cash purchase price ($1.00) and acquire all assets and
liabilities of the Manager, which are expected to be
immaterial.
“The decision to internalize underscores our commitment to
further align the interests of management and shareholders and
demonstrates our continued efforts toward enhanced governance
practices,” said Thomas Hamilton, Chair of Annaly’s Board of
Directors. “The Board, together with management, believes this
transaction best positions Annaly for long-term success and
continued growth of the investment platform.”
“On behalf of the entire management team, we are excited to
continue delivering market-leading performance for Annaly’s
shareholders as an internally-managed REIT,” added Glenn Votek,
Interim Chief Executive Officer & President of Annaly. “This
decision is a logical next step in the series of measures Annaly
has implemented as a leader in our industry from a governance
standpoint. We believe this change will provide Annaly with
enhanced flexibility and resources to create value for our
shareholders over the long term.”
Key Transaction Highlights
- Alignment of interests: Enables stronger alignment of
incentives between management and shareholders and eliminates any
potential conflicts of interest inherent in an external management
structure.
- Enhanced governance and transparency: Strengthens
Annaly’s commitment to robust governance practices, with Annaly
shareholders benefitting from increased transparency and
disclosure.
- Nominal cash purchase price and no termination fees:
Unlike many precedent internalizations in the sector involving
significant payments to the manager, the Company will not pay any
termination fees and none of the executive officers will receive
compensation in connection with their ownership of the
Manager.
- Long-term cost savings: The Internalization is expected
to create cost savings from economies of scale and provide an
opportunity for incremental cost control and operating flexibility,
leading to potential long-term earnings accretion. We expect to
benefit from these cost savings starting in 2021, as the Company
will incur 2020 compensation obligations to employees that we
expect will be counterbalanced by the elimination of the remaining
2020 management fee obligations.
- Continuity of management team: All employees of the
Manager at closing will become employees of Annaly. Certain of the
Company’s senior executive officers have executed employment
agreements with the Company that will become effective upon closing
of the Internalization.
- Expansion of potential investor universe: An internal
management structure may allow for greater diversity of Annaly’s
shareholder base.
The Internalization is subject to certain closing conditions,
including the absence of any development that would reasonably be
expected to have a material adverse effect on the Manager, and the
adoption of an employee-wide retention and severance policy. The
Internalization is expected to close during the second quarter of
2020.
The Internalization Agreement provides that upon closing of the
Internalization, the Manager will waive any fees that would
otherwise be payable in connection with a termination of the
Management Agreement. All other terms of the Management Agreement
remain the same, including the provisions related to fees payable
in connection with a termination of the Management Agreement
outside of the context of the Internalization. Annaly will retain
and employ the Manager’s management team and employees following
the closing of the Internalization.
Additional details on the Internalization can be found in the
Company’s Fourth Quarter 2019 Investor Presentation, available
under the Investors section of the Company’s website at
www.annaly.com/investors.
Evercore served as exclusive financial advisor to the Special
Committee, Hogan Lovells served as legal counsel to the Special
Committee, and F.W. Cook served as the compensation advisor to the
Special Committee. Wells Fargo Securities, LLC served as financial
advisor to the Manager, and Hunton Andrews Kurth served as legal
counsel to the Manager.
About Annaly
Annaly is a leading diversified capital manager that invests in
and finances residential and commercial assets. Annaly’s principal
business objective is to generate net income for distribution to
its stockholders and to optimize its returns through prudent
management of its diversified investment strategies. Annaly has
elected to be taxed as a real estate investment trust, or REIT, for
federal income tax purposes. Prior to the closing of the
transaction discussed above, Annaly is externally managed by Annaly
Management Company LLC. Additional information on the company can
be found at www.annaly.com.
Forward-Looking Statements
This news release contains certain forward-looking statements,
which reflect management's expectations regarding future events and
operating performance and speak only as of the date hereof. These
forward-looking statements involve a number of risks and
uncertainties including, but are not limited to: the occurrence of
any event, change or other circumstances that could give rise to
the termination of the Internalization Agreement; the outcome of
any legal proceedings that may be instituted against the parties to
the Internalization Agreement; the inability to complete the
Internalization due to the failure to satisfy closing conditions or
otherwise; risks that the Internalization disrupts the Company’s
current plans and operations; the impact, if any, of the
announcement or pendency of the Internalization on the Company’s
relationships with third parties; the amount of the costs, fees,
expenses and charges related to the Internalization; the risk that
the expected benefits, including long-term cost savings, of the
Internalization are not achieved, and other risks that are set
forth under “Risk Factors” in the Company’s Annual Report on Form
10-K for the year ended December 31, 2019 and any subsequent
Quarterly Report on Form 10-Q. All forward-looking statements speak
only as of the date of this news release. All subsequent written
and oral forward-looking statements attributable to the Company or
any person acting on its behalf are qualified by the cautionary
statements in this section. The Company undertakes no obligation to
update or publicly release any revisions to forward-looking
statements to reflect events, circumstances or changes in
expectations after the date of this news release.
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Investor Contact
Annaly Capital Management, Inc. Investor Relations 1-888-8Annaly
investor@annaly.com
Media Contact
Brunswick Group Alex Yankus 212-333-3810
ANNALY@brunswickgroup.com
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