In press releases that hit the news wires just minutes apart Thursday, Two Harbors Investment Corp. (TWO) again adjourned a special stockholder meeting to vote on a merger proposal by CrossCountry Mortgage (CCM), while the Cleveland-based lender reaffirmed its “best and final offer” to acquire the MSR-focused real estate investment trust.
Two Harbors had accepted an all-cash offer of $12 per share from CCM on May 8. CCM subsequently pledged to pay TWO shareholders a prorated dividend if the deal successfully closes.
“This represents the highest premium paid for a mortgage-REIT,” CrossCountry stated Thursday. “CCM will not pursue a deal at all costs; there are other strategic alternatives available.”
Two Harbors owns RoundPoint Mortgage Servicing and its book of mortgage servicing rights (MSRs), which had a total unpaid principal balance of roughly $176 billion last December.
Those MSRs are the carrot that prompted a monthslong bidding war between CCM and the parent company of United Wholesale Mortgage (UWM).
UWM most recently offered either $12.50 per share in cash or 2.3328 shares of UWM Holdings Corp. common stock. But Two Harbors has consistently rebuffed UWM’s proposals since terminating a prior all-stock deal with the Michigan-based wholesale lender on March 27.
“Illusory, predatory and unactionable” were adjectives TWO used on May 13 to describe UWM’s latest offer. In a series of statements in recent months, Two Harbors has expressed concerns about UWM’s financial condition and liquidity, at one point saying the UWM proposal “carries financing, closing, business and credibility risks.”
On Thursday afternoon, UWM slammed TWO’s decision to adjourn the shareholder meeting for the second time in as many weeks.
“It should be abundantly clear by now that TWO stockholders do not want the inferior CCM transaction, which CCM has declared to be its best and final offer, nor do they want more adjournments and delays,” UWM stated in a press release, claiming TWO’s board has “steadfastly refused” to engage in “good faith negotiations.”
The UWM statement continued: “The TWO Board and its advisors have run a failed process, put management’s interests ahead of stockholders’ and wasted stockholder capital on advisor fees and delaying tactics. In a textbook example of disfranchisement, Chairman [Stephen] Kasnet has adjourned the meeting despite the fact that a quorum was present and the shareholders voted against doing so.”
Two Harbors disputed the narrative that it hasn’t negotiated in good faith with UWM, claiming in a press release Thursday that its board has “repeatedly identified and communicated the core deficiencies” with the proposals, which it said included “structural issues, inadequate deal certainty, regulatory process, and employee attrition and business continuity.”
UWM “has chosen not to address any of these deficiencies,” TWO maintained.
Two Harbors urged its shareholders to vote in favor of the CCM merger, saying that walking away from the deal would “expose all stockholders to substantial risk with no assurance that equivalent or better terms would re-emerge.”
UWM, in its statement, implored TWO shareholders to vote against the CCM transaction.
The TWO special meeting is scheduled to be reconvened on June 11 at 10 a.m. EDT.
