Combination Would Establish Leading Residential
Mortgage REIT With Increased Scale and Operational Efficiencies
Transaction Expected to Drive Earnings
Accretion and Long-Term Growth
WMC Stockholders to Receive Cash Consideration
as Part of Merger
AG Mortgage Investment Trust, Inc. (NYSE: MITT) (“MITT”), a
publicly traded residential mortgage REIT managed by AG REIT
Management, LLC, an affiliate of Angelo, Gordon & Co., L.P.
(“Angelo Gordon”), a leading $73 billion alternative investment
firm, and Western Asset Mortgage Capital Corporation (NYSE: WMC)
(“WMC”), today announced that they have entered into a definitive
merger agreement, pursuant to which MITT will acquire WMC in a
fixed exchange ratio stock/cash transaction. WMC has terminated its
previously announced acquisition agreement with Terra Property
Trust, Inc. in accordance with the terms of such agreement.
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MITT’s common stock closing price on the New York Stock Exchange
(the "NYSE") on August 7, 2023, implies a transaction value of
$11.23 per WMC common share, consisting of stock consideration of
$10.11 per share and cash consideration of $1.12 per share,
representing a 34% premium to WMC’s unaffected closing stock price
on the NYSE on July 12, 2023.
“We are very pleased to have reached an agreement to acquire WMC
in a combination that presents a compelling, value-maximizing
opportunity for both MITT and WMC stockholders,” said T.J. Durkin,
President, Chief Executive Officer, and board member of MITT. “We
are confident that combining these highly complementary portfolios
will help scale our platform, generate greater operational
efficiencies, cost synergies, and accretive earnings growth, and
benefit all stockholders. We look forward to moving swiftly to
complete this transaction.”
James W. Hirschmann III, Chairman of WMC’s Board of Directors,
stated, “After careful consideration, the Board, in consultation
with its outside legal counsel and financial advisors, unanimously
concluded that entering into the merger agreement with MITT is in
the best interest of WMC’s stockholders. This combination will
allow our stockholders to realize compelling value and we are
excited about what our companies can achieve together.”
Bonnie Wongtrakool, Chief Executive Officer of WMC, added, “The
merger of MITT and WMC delivers immediate cash value to WMC
stockholders as well as allows our stockholders to continue to
participate in the upside of the combined company. With the support
of Angelo Gordon’s deep credit expertise, resources, and proven
track record, we believe MITT is well-positioned to drive long-term
value for the combined company in the residential mortgage market.
We are committed to working closely with the MITT team to quickly
complete the acquisition and deliver substantial value for our
stockholders.”
Compelling Strategic Rationale for MITT and WMC
Stockholders
The merger of MITT and WMC is expected to create numerous
operational and financial benefits, including:
- Cash Consideration for Stockholders: WMC stockholders
will receive a portion of the merger consideration in cash,
consisting of a payment from Angelo Gordon, MITT’s external
manager, equal to the lesser of $7.0 million and approximately
9.99% of the aggregate per share merger consideration, or $6.9
million in total as of August 7, 2023. Any difference between $7.0
million and the 9.99% will be used to benefit the combined company
post-closing by offsetting reimbursable expenses that would
otherwise be payable to MITT’s external manager.
- Strong Financial Rationale: Expected accretion to
earnings within one year of closing and provide the combined
company with an attractive growth profile. The combined company
will have a reduced G&A expense ratio and an optimized capital
structure, with MITT’s preferred equity reduced to 42% (down from
49%).
- Increased Financial Strength and Flexibility: Strong
support and resources from MITT’s external manager, Angelo Gordon,
a leading alternative investment firm with $73 billion of assets
under management, which includes access to Angelo Gordon’s
proprietary, best-in-class securitization platform. The combined
company is also expected to benefit from an expanded investor base
and enhanced trading liquidity and volume. Notably, for the first
year following close, Angelo Gordon will waive $2.4 million of
management fees.
- Compelling Strategic Fit: Strategically aligned
investment strategies focused on securitizing residential mortgage
loans brings the combined company’s investment portfolio to $5.7
billion, consisting of approximately 86% of Non-Agency residential
mortgage loans, 5% of Agency RMBS, and 6% of other residential
investments. WMC’s legacy commercial investments will only
represent approximately 3% of the total investment portfolio on a
pro forma basis.
- Enhanced Operational Efficiencies: Significant operating
efficiencies of approximately $5-7 million on an annual basis are
expected to be realized in the transaction, which is before taking
into account the effective resetting of WMC’s management fee and
MITT’s external manager waiving $2.4 million in management
fees.
Transaction Overview
Each share of WMC common stock will be converted at closing into
the right to receive 1.5 shares of MITT common stock for a total of
9.2 million shares, pursuant to a fixed exchange ratio, subject to
adjustment based on the companies’ respective transaction
expenses,1 and a cash payment from Angelo Gordon equal to
approximately 9.99% of the aggregate per share merger consideration
(not to exceed $7 million in total). Upon the closing of the
transaction, MITT stockholders are expected to own approximately
69% of the combined company’s stock, while WMC stockholders are
expected to own approximately 31% of the combined company’s
stock.
Upon completion of the merger, MITT’s President and Chief
Executive Officer, T.J. Durkin, will serve as Chief Executive
Officer of the combined company, which will continue to operate as
“AG Mortgage Investment Trust, Inc.” and be managed by AG REIT
Management, LLC, an affiliate of Angelo Gordon. MITT’s Board of
Directors will be increased from six to eight directors to include
two WMC-designated directors. The combined company will be
headquartered in New York and will continue to trade on the NYSE
under MITT’s current ticker symbol.
Additional information on the transaction and the anticipated
benefits to MITT and WMC stockholders can be found in MITT’s
investor deck relating to the transaction posted on MITT’s website.
The investor deck is also being furnished by MITT in a Current
Report on Form 8-K being filed by MITT with the Securities and
Exchange Commission (the “SEC”) on the date hereof.
Timing and Approvals
The transaction has been unanimously approved by the Boards of
Directors of MITT and WMC and external managers of MITT and WMC.
The transaction is expected to close in the fourth quarter of 2023,
subject to the respective approvals by the stockholders of MITT and
WMC and other customary closing conditions set forth in the merger
agreement.
Advisors
Piper Sandler & Co. is acting as exclusive financial advisor
and Hunton Andrews Kurth LLP is acting as legal counsel to MITT.
BTIG, LLC and JMP Securities, a Citizens Company, are acting as
financial advisors, and Skadden, Arps, Slate, Meagher & Flom
LLP is acting as legal advisor to WMC.
About AG Mortgage Investment Trust, Inc.
AG Mortgage Investment Trust, Inc. is a residential mortgage
REIT with a focus on investing in a diversified risk-adjusted
portfolio of residential mortgage-related assets in the U.S.
mortgage market. AG Mortgage Investment Trust, Inc. is externally
managed and advised by AG REIT Management, LLC, a subsidiary of
Angelo, Gordon & Co., L.P., a leading alternative investment
firm focusing on credit and real estate strategies.
Additional information can be found on MITT’s website at
www.agmit.com.
About Angelo, Gordon & Co., L.P.
Angelo, Gordon & Co., L.P. is a leading alternative
investment firm founded in November 1988. The firm currently
manages approximately $73 billion* with a primary focus on credit
and real estate strategies. Angelo Gordon has over 650 employees,
including more than 200 investment professionals, and is
headquartered in New York, with associated offices elsewhere in the
U.S., Europe and Asia. For more information, visit
www.angelogordon.com.
*Angelo Gordon’s (the "firm") currently stated assets under
management (“AUM”) of approximately $73 billion as of December 31,
2022 reflects fund-level asset-related leverage. Prior to May 15,
2023, the firm calculated its AUM as net assets under management
excluding leverage, which resulted in firm AUM of approximately $53
billion as of December 31, 2022. The difference reflects a change
in the firm’s AUM calculation methodology and not any material
change to the firm’s investment advisory business. For a
description of the factors the firm considers when calculating AUM,
please see the disclosure at www.angelogordon.com/disclaimers/.
About Western Asset Mortgage Capital Corporation
WMC is a real estate investment trust that invests in, finances,
and manages a diverse portfolio of assets consisting of Residential
Whole Loans, Non-Agency RMBS, and to a lesser extent GSE Risk
Transfer Securities, Commercial Loans, Non-Agency CMBS, Agency
RMBS, Agency CMBS, and ABS. WMC is externally managed and advised
by Western Asset Management Company, LLC, an investment advisor
registered with the Securities and Exchange Commission and a
wholly-owned subsidiary of Franklin Resources, Inc.
Additional Information
This communication relates to the proposed merger (the “Merger”)
pursuant to the terms of a definitive agreement and plan of merger
(the “Merger Agreement”). In connection with the proposed Merger,
MITT expects to file with the SEC a registration statement on Form
S-4 that will include a prospectus of MITT and a joint proxy
statement of MITT and WMC. MITT and WMC also expect to file with
the SEC other documents regarding the Merger. The Merger will be
submitted to the stockholders of MITT and WMC for their
consideration. The definitive joint proxy statement/prospectus will
be sent to the stockholders of MITT and WMC, and will contain
important information about MITT, WMC, the proposed Merger and
related matters. This communication is not a substitute for any
proxy statement, registration statement, tender or exchange offer
statement, prospectus or other document MITT or WMC may file with
the SEC in connection with the proposed Merger and related matters.
INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE
REGISTRATION STATEMENT ON FORM S-4 AND THE RELATED JOINT PROXY
STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS
THERETO) AND OTHER RELEVANT DOCUMENTS FILED BY MITT AND WMC WITH
THE SEC CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT
MITT, WMC AND THE PROPOSED MERGER. Investors and security
holders may obtain copies of these documents free of charge (if and
when they become available) through the website maintained by the
SEC at www.sec.gov. Copies of the documents filed by MITT with the
SEC are also available free of charge on MITT’s website at
www.agmit.com. Copies of the documents filed by WMC with the SEC
are also available free of charge on WMC’s website at
www.westernassetmcc.com.
Participants in the Solicitation Relating to the
Merger
MITT, WMC and certain of their respective directors and
executive officers and certain other affiliates of MITT and WMC may
be deemed to be participants in the solicitation of proxies from
the common stockholders of WMC and MITT in respect of the proposed
Merger. Information regarding WMC and its directors and executive
officers and their ownership of common stock of WMC can be found in
WMC’s Annual Report on Form 10-K for the fiscal year ended December
31, 2022, filed with the SEC on March 13, 2023, and in its
definitive proxy statement relating to its 2023 annual meeting of
stockholders, filed with the SEC on May 2, 2023. Information
regarding MITT and its directors and executive officers and their
ownership of common stock of MITT can be found in MITT’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2022,
filed with the SEC on February 27, 2023, and in its definitive
proxy statement relating to its 2023 annual meeting of
stockholders, filed with the SEC on March 22, 2023. Additional
information regarding the interests of such participants in the
Merger will be included in the proxy statement/prospectus and other
relevant documents relating to the proposed Merger when they are
filed with the SEC. These documents are available free of charge on
the SEC’s website and from MITT or WMC, as applicable, using the
sources indicated above.
No Offer or Solicitation
This communication and the information contained herein shall
not constitute an offer to sell or the solicitation of an offer to
buy any securities, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offering of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act, as amended (the
“Securities Act”). This communication may be deemed to be
solicitation material in respect of the proposed Merger.
Forward-Looking Statements
This communication contains certain “forward-looking” statements
within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act, as amended. MITT and WMC intend such
forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995 and include this statement
for purposes of complying with the safe harbor provisions. Words
such as “expects,” “anticipates,” “intends,” “plans,” “believes,”
“seeks,” “estimates,” “will,” “should,” “may,” “projects,” “could,”
“estimates” or variations of such words and other similar
expressions are intended to identify such forward-looking
statements, which generally are not historical in nature, but not
all forward-looking statements include such identifying words.
Forward-looking statements regarding MITT and WMC include, but are
not limited to, statements related to the proposed Merger,
including the anticipated timing, benefits and financial and
operational impact thereof; other statements of management’s
belief, intentions or goals; and other statements that are not
historical facts. These forward-looking statements are based on
each of the companies’ current plans, objectives, estimates,
expectations and intentions and inherently involve significant
risks and uncertainties. Actual results and the timing of events
could differ materially from those anticipated in such
forward-looking statements as a result of these risks and
uncertainties, which include, without limitation, risks and
uncertainties associated with: MITT’s and WMC’s ability to complete
the proposed Merger on the proposed terms or on the anticipated
timeline, or at all, including risks and uncertainties related to
securing the necessary stockholder approval from WMC’s and MITT’s
respective stockholders and satisfaction of other closing
conditions to consummate the proposed Merger; the occurrence of any
event, change or other circumstance that could give rise to the
termination of the Merger Agreement; risks related to diverting the
attention of MITT and WMC management from ongoing business
operations; failure to realize the expected benefits of the
proposed Merger; significant transaction costs and/or unknown or
inestimable liabilities; the risk of stockholder litigation in
connection with the proposed Merger, including resulting expense or
delay; the risk that MITT’s and WMC’s respective businesses will
not be integrated successfully or that such integration may be more
difficult, time-consuming or costly than expected; and effects
relating to the announcement of the proposed Merger or any further
announcements or the consummation of the proposed Merger on the
market price of MITT’s or WMC’s common stock. Additional risks and
uncertainties related to MITT’s and WMC’s business are included
under the headings “Forward-Looking Statements” and “Risk Factors”
in MITT’s and WMC’s Annual Report on Form 10-K for the year ended
December 31, 2022, and in other reports and documents filed by
either company with the SEC from time to time. Moreover, other
risks and uncertainties of which MITT or WMC are not currently
aware may also affect each of the companies’ forward-looking
statements and may cause actual results and the timing of events to
differ materially from those anticipated. The forward-looking
statements made in this communication are made only as of the date
hereof or as of the dates indicated in the forward-looking
statements, even if they are subsequently made available by MITT or
WMC on their respective websites or otherwise. Neither MITT nor WMC
undertakes any obligation to update or supplement any
forward-looking statements to reflect actual results, new
information, future events, changes in its expectations or other
circumstances that exist after the date as of which the
forward-looking statements were made, except as required by
law.
1 Exchange ratio is based on 6.150 million outstanding shares of
WMC common stock on a fully-diluted basis as of June 30, 2023.
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Investors AG Mortgage Investment Trust, Inc. Investor
Relations (212) 692-2110 ir@agmit.com Western Asset Mortgage
Capital Corporation Larry Clark Financial Profiles, Inc. (310)
622-8223 lclark@finprofiles.com Media AG Mortgage Investment
Trust, Inc. Jonathan Gasthalter/Amanda Shpiner Gasthalter & Co.
(212) 257-4170 Western Asset Mortgage Capital Corporation Tricia
Ross Financial Profiles, Inc. (310) 622-8226
tross@finprofiles.com
Western Asset Mortgage C... (NYSE:WMC)
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