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Accredited Home Lenders Holding Co. (Nasdaq:LEND), a
nationwide mortgage company specializing in non-prime residential
mortgage loans, and Aames Investment Corporation (NYSE:AIC) today
announced a definitive agreement pursuant to which Accredited will
acquire Aames.
Aames originates non-prime mortgage loans through a network of 76
retail branch offices and three regional wholesale operations centers,
while Accredited originates non-prime mortgage loans through 45 retail
branches and 15 regional wholesale operations centers. As a result of
the acquisition, the combined business is expected to attain the
following rankings in the non-prime industry:
-- Sixth largest retail originator
-- Twelfth largest overall originator
-- Ninth largest non-prime mortgage portfolio
-- Nineteenth largest servicing portfolio
"Aames' nationwide franchise will almost triple Accredited's
retail branches, creating one of the nation's largest independent
retail originators," said James A. Konrath, chairman and chief
executive officer of Accredited. "Aames has a strong retail platform
headed by two experienced, savvy senior managers who understand
running a business for profit."
Mr. Konrath added, "In addition to the benefits to our retail
platform, we expect to reduce non-interest expenses significantly by
eliminating redundant overhead and operating costs, as well as by
merging Aames' wholesale group with little overlap. Also, we
anticipate being able to improve Aames' profitability by enhancing the
execution of whole-loan sale and securitization activity, as well as
lowering the cost of funds."
The stock-and-cash transaction values Aames at approximately $340
million, or $5.35 per share at yesterday's closing prices. Of the $340
million purchase price, approximately $109 million, or 32% of the
purchase price, will be paid in cash to Aames stockholders. The
remainder will be paid in Accredited's common stock at an exchange
ratio of 0.0700 shares of Accredited's common stock for each share of
Aames common stock. Aames may be required to distribute dividends to
stockholders to satisfy certain REIT tax requirements. The amount of
the total consideration represented by cash will be reduced by REIT
dividends, if any, to Aames stockholders between now and closing.
"This transaction allows our stockholders to participate in the
future opportunities of a company with deep financial resources and
proven operational skills," said A. Jay Meyerson, chairman and chief
executive officer of Aames. "Accredited already ranks among the most
profitable and lowest cost originators, and it offers the best
platform for the continued development of our unique retail business."
Integration
The companies share many similarities in cultures and business
approaches. Both companies rely on both wholesale and retail channels
to originate non-prime mortgages. Accredited intends to retain
substantially all of Aames' retail operations. Accredited will
integrate Aames' wholesale operations into its existing wholesale
business.
Michael Matthews, chief production officer at Aames, will become
director of integration of wholesale and retail operations at
Accredited. James Fullen, chief operations officer at Aames, will
become Accredited's director of retail operations. In addition, Mr.
Meyerson will join Accredited's board, along with one other nominee
proposed by Aames.
"This acquisition will allow us to build on the strength of our
proven business model, which emphasizes profitable origination and
portfolio growth, minimize our net cost to originate, and leverage our
experienced management team," Mr. Konrath added. "The non-prime
mortgage experience and talent throughout Aames is a terrific cultural
fit with Accredited. We are pleased to offer Aames' stockholders this
exceptional opportunity to share in the growth of Accredited's
platform."
The agreement has been unanimously approved by both companies'
boards. A condition of closing is approval by both companies'
stockholders, as well as regulatory authorities and customary closing
conditions. The transaction is expected to close during the third
quarter.
"This combined company will achieve significant synergies and
bring together two strong management teams with records of prudent
growth," said Mr. Meyerson of Aames. "Today's capital markets climate
limits our ability to economically raise new capital to fuel our
future growth. Accredited, with its strong operating skills and
capital base, is well positioned to move our people and our operations
to the next level and reward our stockholders."
Financial Expectations
Anticipating a closing date in the third quarter, Accredited
anticipates a dilutive impact on earnings per share in 2006 of $1.00
to $1.35 per share, depending on the actual closing date. Accredited
expects the transaction to be accretive to GAAP earnings in 2007. The
accretion assumes, among other items, improvement in Aames' cost to
originate, whole loan sale execution and financing costs. In addition,
Accredited expects to receive a benefit in its cash tax payments from
a portion of Aames' unused net operating tax loss carry-forwards.
Representations
Accredited Home Lenders Holding Co. is represented in the
transaction by its financial advisor, J.P. Morgan Securities Inc., and
its legal counsel, DLA Piper Rudnick Gray Cary. Aames Investment
Corporation is represented by its financial advisor, Credit Suisse,
Inc., and its legal counsel, Sullivan & Cromwell LLP.
Conference Call
Accredited will host a conference call on May 25, 2006 at 1 p.m.
EDT (10 a.m. PDT) to discuss the transaction. The call will be
available by telephone and webcast.
The telephone number for the conference call is 866-713-8563 for
callers in the United States, or 617-597-5311 for international
callers. The participant passcode is 70029313.
The call will be webcast by CCBN and can be accessed live at
Accredited's website -- http://investors.accredhome.com. A replay of
the conference call will be archived on the website, as well as the
accompanying slide presentation.
About Accredited Home Lenders Holding Co.
Accredited Home Lenders Holding Co. is a mortgage company
operating throughout the U.S. and in Canada. Accredited originates,
finances, securitizes, services and sells non-prime mortgage loans
secured by residential real estate. Founded in 1990, the company is
headquartered in San Diego with a market capitalization of
approximately $1.2 billion, 2005 originations of $16.6 billion, a $9.7
billion portfolio as of December 31, 2005 and $156 million of net
income for 2005. Accredited's experienced management team,
profit-centered culture, leading cost structure and strong capital
markets relationships have enabled it to deliver exceptional results
to shareholders, including 540% cumulative return since its IPO in
February 2003 as of March 31, 2006. Accredited's earnings per share
has grown at a compound annual growth rate of 19% over the past two
years. Additional information may be found at
http://investors.accredhome.com.
About Aames Investment Corp.
Headquartered in Los Angeles, Calif., Aames originates mortgage
loans in 47 states. Aames Financial is a 50-year-old national mortgage
banking company focused primarily on originating non-prime residential
mortgage loans through wholesale and retail channels under the name
"Aames Home Loan." Additional information may be found at
www.aames.com.
Forward-Looking Statements
Certain matters discussed in this news release, including without
limitation the expected benefits of the merger, constitute
forward-looking statements within the meaning of the federal
securities laws. Actual results and the timing of certain events could
differ materially from those projected in or contemplated by these
forward-looking statements due to a number of factors, including but
not limited to: interest rate volatility and the level of interest
rates generally; the nature and amount of competition and the
availability of alternative loan products not offered by the company;
general political and economic conditions; the sustainability of loan
origination volumes; the availability of financing for the origination
of mortgage loans; the ability of the company to sell or securitize
mortgage loans; the company's ability to grow its portfolio; the
ability of the company to manage costs; and other risk factors as
outlined in Accredited Home Lenders Holding Co.'s and Aames Investment
Corporation's annual reports on Form 10-K for the period ended
December 31, 2005, their reports on Form 10-Q for the first quarter of
2006, and other documents filed with the SEC.
Additional Information
In connection with the pending transaction, Accredited Lenders
Holding Co. ("Accredited") will file with the SEC a Registration
Statement on Form S-4 containing a Proxy Statement/Prospectus for the
stockholders of Aames Investment Corporation ("Aames"). Aames
stockholders are urged to read the Registration Statement and the
Proxy Statement/Prospectus when they are available, as well as all
other relevant documents filed or to be filed with the SEC, because
they will contain important information about Accredited, Ames and the
proposed transaction. The final Proxy Statement/Prospectus will be
mailed to stockholders of Aames after the Registration Statement is
declared effective by the SEC. Aames stockholders will be able to
obtain the Registration Statement, the Proxy Statement/Prospectus and
any other relevant filed documents for free at the SEC's website
(www.sec.gov). These documents can also be obtained for free from
Accredited Home Lenders by directing a request to Investor Relations,
15090 Avenue of Science, San Diego, CA 92128.
Accredited, Aames and their respective directors and officers may
be deemed to be participants in the solicitation of approvals from
Aames stockholders in respect of the proposed transaction. Information
regarding the participants of Accredited and Aames will be available
in the Proxy Statement/Prospectus, which will be filed with the SEC.
Additional information regarding the interests of such participants
will be included in the Registration Statement containing the Proxy
Statement/Prospectus that will be filed with the SEC.