Annaly Capital Reaches Deal to Buy Rest of CreXus After Raising Offer

   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 [e-mail]

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