Financially Superior Offer with Closing
Certainty Represents 18.2% Premium to WMC’s Stock
Book-for-Book Transaction Also Includes Cash
Consideration to WMC Stockholders and Establishes a Company that is
Meaningfully More Efficient Through Significant Cost Synergies and
Earnings Accretion Post-Close
Strong Support from MITT’s External Manager,
Angelo Gordon, Through $7 Million Cash Contribution Towards
Transaction
Urges WMC’s Board to Promptly Engage with MITT
to Accept its Superior Proposal
AG Mortgage Investment Trust, Inc. (NYSE: MITT) (“MITT”) today
announced that it submitted a proposal to the Board of Directors of
Western Asset Mortgage Capital Corporation (NYSE: WMC) (“WMC”) to
acquire WMC for a fixed exchange ratio, representing an implied
price of $9.88 per share, consisting of a stock consideration of
$8.90 per share and cash consideration of $0.98 per share. The
offer represents an 18.2% premium to WMC’s closing share price, all
based on MITT and WMC stock prices as of July 12, 2023.
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Key highlights of MITT’s acquisition proposal, as noted in
its letter to the WMC Board of Directors (the “WMC Board”),
include:
- WMC and MITT are highly complementary businesses, creating
significant business and cost synergies;
- WMC stockholders will receive a portion of the transaction
consideration in cash;
- MITT’s proposal provides speed and certainty of transaction
closing and avoids accelerating payment of WMC’s convertible
debt;
- The proposed transaction eliminates post-closing selling
pressure given MITT stockholders already have liquidity; and
- MITT’s stock trades on the NYSE with an observable value with
strong support from its external manager, Angelo Gordon, a leading
alternative investment firm with $73 billion of assets under
management.
The full text of MITT’s letter to the WMC Board follows. A
presentation with additional details regarding MITT’s offer is
available at
https://www.agmit.com/news-events-presentations/presentations.
July 13, 2023
Board of Directors Western Asset Mortgage Capital Corporation
11601 Wilshire Blvd., Suite 1920 Los Angeles, CA 90025
Dear Members of the Board,
I am writing on behalf of the Board of Directors of AG Mortgage
Investment Trust, Inc. (“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. We have carefully evaluated
the merits of a combination between MITT and Western Asset Mortgage
Capital Corporation (“WMC”) and concluded that such a transaction
would be value maximizing for the stockholders of both WMC and
MITT.
Accordingly, MITT is pleased to submit this non-binding
proposal to purchase WMC for an implied value of $9.88 per share,
representing an 18.2% premium to WMC’s closing share price as of
July 12, 2023. Notably, we are submitting our proposal
following WMC’s proposed merger (the “TPT transaction”) with Terra
Property Trust, Inc. (“TPT”), a non-traded REIT, which has been
followed by a 10.1% decline in WMC’s share price since being
announced on June 28, 2023.
We believe combining WMC with MITT would result in a focused,
residential mortgage REIT with an optimized capital structure and
significant growth potential and value-creating opportunities for
the combined company’s stockholders. Our complementary core
competences in residential mortgage credit would establish an even
more efficient and competitive company. Importantly, our proposal
provides closing certainty and does not accelerate WMC’s
convertible notes, while also benefiting WMC stockholders,
particularly given the cash consideration we describe in greater
detail below, significant opportunities for cost synergies, and
expected earnings accretion following the transaction’s close.
We stand ready to engage meaningfully with the WMC Board of
Directors (the “WMC Board”) and request that the WMC Board properly
and expeditiously evaluate our offer given its substantial benefits
to all stockholders.
Key Terms of the MITT Proposal
- MITT to acquire WMC based on a book-for-book exchange, with
each company’s book value adjusted for transaction expenses,
pursuant to which each share of WMC common stock would be converted
at closing into the right to receive:
- 1.468 shares of MITT common stock 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 the lesser of $7.0
million or approximately 9.9% of the aggregate per share merger
consideration.
- If the cash consideration to WMC’s stockholders is less than
$7.0 million due to the 9.9% cap, Angelo Gordon will pay the
difference to MITT to benefit the combined company by offsetting
transaction expenses and/or waiving expense reimbursements payable
to MITT’s manager.
- The pro forma combined company to pay a $7.0 million
termination fee due to WMC’s external manager, the break fee, and
the cost of WMC’s D&O tail insurance.
- MITT’s manager to waive $2.4 million of management fees
post-close.
- MITT’s Board of Directors to be expanded to include up to two
additional members from WMC’s independent directors.
- Transaction to not require any financing condition.
For illustration, based on the companies’ respective March 31,
2023 book values per share and MITT’s closing stock price as of
July 12, 2023, the implied value of the equity portion of the
merger consideration would be $8.90 per share and the additional
cash payment would be $0.98 per share. In addition, based on the
foregoing, Angelo Gordon would contribute $1.0 million to MITT to
offset transaction expenses and/or waive expense
reimbursements.
We are not aware of any material regulatory impediments to the
proposed transaction and believe the transaction can be consummated
expeditiously. A copy of our proposed merger agreement is being
provided under separate cover, and we will make ourselves available
immediately to discuss, negotiate, and finalize its terms.
Superior Benefits of the MITT Proposal
We believe our acquisition proposal offers WMC stockholders
substantial upside, while eliminating many risks posed by the TPT
transaction. Specifically:
- MITT’s stock trades on the NYSE with an observable value, while
TPT’s shares are not listed and have never been valued by public
markets through a stock exchange listing.
- There is no post-closing selling pressure given MITT
stockholders already have liquidity.
- WMC and MITT are highly complementary businesses, eliminating
any need for strategy shift and creating significant business and
cost synergies.
- WMC stockholders would receive a portion of the transaction
consideration in cash.
- MITT’s proposal provides speed and certainty of closing.
- MITT’s proposal avoids accelerating payment of WMC’s
convertible debt.
- MITT has strong support from external manager, Angelo Gordon, a
leading alternative investment firm with $73 billion of assets
under management.
A Combined WMC and MITT: A Transformative Transaction
Combining WMC and MITT, two publicly traded REITs, presents a
value-enhancing investment opportunity for WMC’s stockholders,
which we believe is superior to the TPT transaction.
We urge the WMC Board to consider its fiduciary duty and its
contractual rights under the TPT merger agreement and enter into
discussions with us to finalize the terms of our proposed superior
transaction. We believe doing so would be in the best interests of
WMC and all WMC stockholders. Our Board of Directors and
external manager have unanimously approved this non-binding
proposal and are prepared to work towards an accelerated
closing.
We and our advisors stand ready to engage with you and your team
as quickly and intensively as possible. We are confident that we
will be able to significantly enhance the value of the combined
entity and generate substantial long-term value for both WMC and
MITT stockholders.
We hope that the WMC Board shares our enthusiasm and look
forward to a prompt and favorable reply.
Sincerely yours,
T.J. Durkin President, CEO, and Member of the Board AG Mortgage
Investment Trust, Inc.
Piper Sandler is acting as financial advisor and Hunton Andrews
Kurth LLP is acting as legal counsel to MITT in connection with the
proposed transaction.
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. (“Angelo Gordon”) 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 linked here.
Additional Information
This communication relates to a proposal which MITT has made for
an acquisition of WMC. In furtherance of this proposal and subject
to future developments, MITT (and, if a negotiated transaction is
agreed, WMC) may file one or more registration statements, proxy
statements, tender or exchange offer statements, prospectuses or
other documents with the United States Securities and Exchange
Commission (the “SEC”). 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 transaction.
INVESTORS AND SECURITY HOLDERS OF MITT AND WMC ARE URGED TO READ
ANY SUCH PROXY STATEMENT, REGISTRATION STATEMENT, TENDER OR
EXCHANGE OFFER STATEMENT, PROSPECTUS AND/OR OTHER DOCUMENTS FILED
WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY
BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT
THE PROPOSED TRANSACTION. Any definitive proxy statement or
prospectus (if and when available) will be delivered to
shareholders of WMC or MITT, as applicable. Investors and security
holders will be able to obtain free copies of these documents (if
and when available) and other documents filed with the SEC by MITT
through the website maintained by the SEC at
http://www.sec.gov.
This communication is neither a solicitation of a proxy nor a
substitute for any proxy statement or other filings that may be
made with the SEC. Nonetheless, MITT and its directors and
executive officers and other members of management and Angelo
Gordon employees may be deemed to be participants in the
solicitation of proxies in respect of the proposed transaction. You
can find information about MITT’s executive officers and directors
in MITT’s definitive proxy statement filed with the SEC on March
22, 2023, and Annual Report on Form 10-K filed with the SEC on
February 27, 2023. Additional information regarding the interests
of such potential participants will be included in one or more
registration statements, proxy statements, tender or exchange offer
statements or other documents filed with the SEC if and when they
become available. You may obtain free copies of these documents (if
and when available) using the sources indicated above.
This communication 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 of 1933, as amended.
Forward-Looking
Statements
This communication may include “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995. These forward-looking statements include, but are not
limited to, statements regarding MITT’s offer to acquire WMC, the
consideration in the proposed transaction, its expected future
performance (including expected results of operations and financial
guidance) and the combined company’s future financial condition,
operating results, strategy and plans. Forward-looking statements
may be identified by the use of the words “anticipates,” “expects,”
“intends,” “plans,” “should,” “could,” “would,” “may,” “will,”
“believes,” “estimates,” “potential,” “target,” “opportunity,”
“tentative,” “positioning,” “designed,” “create,” “predict,”
“project,” “seek,” “ongoing,” “upside,” “increases” or “continue”
and variations or similar expressions. These statements are based
upon the current expectations and beliefs of management and are
subject to numerous assumptions, risks and uncertainties that
change over time and could cause actual results to differ
materially from those described in the forward-looking statements.
These assumptions, risks and uncertainties include, but are not
limited to, assumptions, risks and uncertainties discussed in
MITT’s most recent annual or quarterly report filed with the SEC
and assumptions, risks and uncertainties relating to the proposed
transaction, as detailed from time to time in MITT’s and WMC’s
filings with the SEC, which factors are incorporated herein by
reference. Important factors that could cause actual results to
differ materially from the forward-looking statements made in this
communication are set forth in other reports or documents that MITT
may file from time to time with the SEC, and include, but are not
limited to: (i) the ultimate outcome of any possible transaction
between MITT and WMC, including the possibility that WMC will not
respond or will reject a transaction with MITT; (ii) the risk that
anticipated cost synergies and any other benefits or savings from
the transaction may not be fully realized or may take longer to
realize than expected; (iii) the amount and impact of the
transaction expenses that will be incurred by MITT and WMC; (iv)
the ability to meet any closing conditions to any possible
transaction, including the necessary shareholder approvals; (v)
market volatility in stock prices of MITT and WMC; and (vi) general
economic conditions that are less favorable than expected.
Additional risks and uncertainties related to MITT’s business are
included under the headings “Forward-Looking Statements” and “Risk
Factors” in MITT’s Annual Report on Form 10-K for the year ended
December 31, 2022 and in other reports and documents filed with the
SEC from time to time. All forward-looking statements attributable
to MITT or any person acting on MITT’s behalf are expressly
qualified in their entirety by this cautionary statement. Readers
are cautioned not to place undue reliance on any of these
forward-looking statements. These forward-looking statements speak
only as of the date hereof. Except as required by law, MITT
undertakes no obligation to update any of these forward-looking
statements to reflect events or circumstances after the date of
this communication or to reflect actual outcomes.
1 Exchange ratio is based on 6.122 million
outstanding shares of WMC common stock on a fully-diluted
basis.
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Investors AG Mortgage Investment Trust, Inc. Investor
Relations (212) 692-2110 ir@agmit.com
Media Jonathan Gasthalter/Amanda Shpiner Gasthalter &
Co. 212 257 4170
AG Mortgage Investment (NYSE:MITT)
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