Annaly to Merge with Hatteras Financial

Annaly headquarters at 1211 Ave. of the Americas in Manhattan. The mortgage REIT has been moving away from a strictly residential focus.

NEW YORK CITY—Continuing a push to diversify its platform, mortgage REIT Annaly Capital Management Inc. said Monday it had agreed to acquire Hatteras Financial Corp. in a cash-and-stock deal valued at $1.5 billion. The boards of both companies have approved the merger, which is expected to close in the third quarter of 2016. The addition of Winston-Salem, NC-based Hatteras’ business is expected to be accretive to Annaly’s earnings this year. Hatteras’ portfolio, consisting of agency RMBS, residential whole loans and mortgage servicing rights, is complementary to Annaly’s existing businesses, the company said Monday. “This strategic transaction represents a unique and sizeable value creation opportunity for our shareholders,” says Kevin Keyes, Annaly’s president and CEO. “With the acquisition of Hatteras, we significantly grow our diversified portfolio and broaden our investment options, further fortifying Annaly’s position as the market leading mortgage REIT.” Annaly’s agreement to acquire Hatteras marks the latest illustration of the consolidation trend in the mREIT sector. Zais Financial said last week that it would combine with privately held commercial mREIT Sutherland Asset Management. In March, Armour Residential REIT Inc. said it would buy Javelin Mortgage Investment Corp. for $7.14 per share, following the merger agreement announced in February by Apollo Residential Mortgage Inc. and Apollo Commercial Real Estate Finance Inc. This past May, Annaly began diversifying away from its agency-only mortgage business model by hiring a team of commercial real estate investors from the GE Capital Real Estate group. A report from Kroll Bond Rating Agency called the hires “a significant change” for Annaly, since its main business was principally in residential MBS for the past two decades. Wells Fargo Securities and Sandler O’Neill + Partners LP served as financial advisors to Annaly in the Hatteras deal, and Wachtell, Lipton, Rosen & Katz served as its legal counsel. Goldman Sachs served as financial advisor to the Hatteras special committee of independent directors, DLA Piper LLP (US) served as legal counsel to Hatteras and Hogan Lovells US LLP served as legal counsel to the special committee.