Key facts
- Two Harbors Investment Corp. announced UWM Holdings Corp. did not submit a revised bid.
- The waiver period for UWM to negotiate expired on Friday.
- CrossCountry Mortgage's offer of $12 per share in cash plus a stub dividend is being recommended.
- Two Harbors' board cited concerns over UWM's default stock consideration being significantly less valuable than the cash option.
- Two Harbors is urging its shareholders to approve the sale to CrossCountry Mortgage.
Two Harbors Investment Corp. announced that UWM Holdings Corp. failed to submit a revised offer or request an extension to negotiate the potential acquisition of Two Harbors. The seller is now urging its shareholders to approve the sale to CrossCountry Mortgage (CCM).
The waiver period, which allowed for negotiations after investor feedback and a recommendation from proxy advisory firm Institutional Shareholder Services, expired on Friday. CCM's current offer stands at $12 per share in cash, along with a stub dividend, which will be put to a shareholder vote on June 23.
UWM had previously proposed $12.50 per share in cash or, alternatively, 2.3328 shares of UWMC stock. During a video call on June 8, UWM's CEO, Mat Ishbia, discussed concepts such as making cash the default consideration or modifying the exchange ratio. However, when asked for a specific written proposal, Ishbia indicated uncertainty about whether one would be forthcoming.
Two Harbors' board has voiced concerns that UWM's most recent proposal would have defaulted non-electing stockholders into UWM shares, which, based on UWM's June 12 closing price of $2.38, would have an implied value of approximately $5.55 per Two Harbors share. This is less than half of the $12.50 cash offer and significantly less than CrossCountry's $12 cash offer plus dividend, especially if a realistic 7% of investors failed to make an election.
The Two Harbors board reiterated its fiduciary duty to all stockholders, emphasizing a preference for fully financed, all-cash consideration. The board also highlighted comments from UWM's CEO acknowledging that "no one smart is going to pick UWM stock at the price it's at right now."