Item 1.01 Entry into a Material Definitive Agreement.
Merger Agreement
On December 6, 2020, Anworth Mortgage Asset Corporation, a Maryland corporation
("Anworth"), Ready Capital Corporation, a Maryland corporation ("Ready
Capital"), and RC Merger Subsidiary, LLC, a Delaware limited liability company
and a wholly owned subsidiary of Ready Capital ("Merger Sub"), entered into an
Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which,
subject to the terms and conditions therein, Anworth will be merged with and
into Merger Sub, with Merger Sub remaining as a wholly owned subsidiary of Ready
Capital (such surviving company, the "Surviving Company", and such transaction,
the "Merger"). Following the consummation of the Merger, the Surviving Company
will be contributed to Ready Capital's operating partnership subsidiary in
exchange for additional partnership units.
Under the terms of the Merger Agreement, at the effective time of the Merger
(the "Effective Time"), each share of common stock, par value $0.01 per share,
of Anworth ("Anworth Common Stock") issued and outstanding immediately prior to
the Effective Time (excluding any shares held by Ready Capital, Merger Sub or
any of their respective subsidiaries) will automatically be converted into the
right to receive from Ready Capital (i) 0.1688 shares of common stock, par value
$0.0001, of Ready Capital ("Ready Capital Common Stock"), plus (ii) $0.61 in
cash minus the Per Share Excess Amount, in each case, subject to adjustment as
provided in the Merger Agreement (the "Per Share Common Merger Consideration").
The Per Share Excess Amount means an amount, if any, per share by which
Anworth's termination expenses and transaction expenses exceed $32.5 million.
Cash will be paid in lieu of any fractional shares of Ready Capital Common Stock
that would have been received as a result of the Merger.
Certain outstanding phantom shares granted by Anworth under its 2014 Equity
Compensation Plan or 2004 Equity Compensation Plan, as amended, will, as of the
Effective Time, automatically become fully vested and then immediately cancelled
in exchange for the right to receive the Per Share Common Merger Consideration.
The remaining outstanding non-vesting phantom shares granted by Anworth will, as
of the Effective Time, automatically be cancelled without consideration.
Each outstanding dividend equivalent right granted by Anworth under its 2007
Dividend Equivalent Rights Plan will, as of the Effective Time, automatically be
cancelled; provided, that any accrued amounts that have not yet been paid with
respect to such dividend equivalent rights will be paid to the holders thereof
at the Effective Time (or as soon as practicable thereafter but in no event
later than the first payroll date following the Effective Time), less applicable
income and employment tax withholdings.
At the Effective Time, each share of Anworth's 8.625% Series A Cumulative
Preferred Stock, $0.01 par value per share, will be converted into the right to
receive one share of a newly designated series of Ready Capital preferred stock,
par value $0.0001 per share, which Ready Capital expects will be classified and
designed as Ready Capital's Series B Preferred Stock ("Ready Capital Series B
Preferred Stock"); each share of Anworth's 6.25% Series B Cumulative Convertible
Preferred Stock, $0.01 par value per share, will be converted into the right to
receive one share of a newly designated series of Ready Capital preferred stock,
par value $0.0001 per share, which Ready Capital expects will be classified and
designed as Ready Capital's Series C Preferred Stock ("Ready Capital Series C
Preferred Stock"); and each share of Anworth's 7.625% Series C Cumulative
Redeemable Preferred Stock, $0.01 par value per share, will be converted into
the right to receive one share of a newly designated series of Ready Capital
preferred stock, par value $0.0001 per share, which Ready Capital expects will
be classified and designed as Ready Capital's Series D Preferred Stock ("Ready
Capital Series D Preferred Stock").
The Merger Agreement provides that Anworth and Ready Capital will pay a special
dividend in cash on the last business day prior to the closing of the Merger
with a record date that is three business days before the payment date.
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The obligation of each party to consummate the Merger is subject to a number of
conditions, including, among others, (a) the approval of the issuance of the
Ready Capital Common Stock in connection with the Merger by the affirmative vote
of a majority of the votes cast at a meeting of Ready Capital stockholders (the
"Ready Capital Stockholder Approval"), (b) the approval of the Merger and the
other transactions contemplated by the Merger Agreement by the affirmative vote
of the holders of at least a majority of the outstanding shares of Anworth
Common Stock entitled to vote on the Merger (the "Anworth Stockholder
Approval"), (c) the registration and listing on the New York Stock Exchange of
the shares of Ready Capital Common Stock, Ready Capital Series B Preferred
Stock, Ready Capital Series C Preferred Stock, and Ready Capital Series D
Preferred Stock that will be issued in connection with the Merger, (d) the
respective representations and warranties of the parties being true and correct,
subject to the materiality standards contained in the Merger Agreement, (e) each
party's compliance in all material respects with their respective covenants and
agreements set forth in the Merger Agreement, (f) the absence of a material
adverse effect with respect to either Anworth or Ready Capital, (g) the
effectiveness of an amendment to the management agreement between Anworth and
its external manager pertaining to the termination of such management agreement
effective as of the Effective Time, (h) the effectiveness of an amendment to the
management agreement between Ready Capital and its external manager pertaining
to the reduction in the base management fee payable to Ready Capital's external
manager by $1,000,000 per quarter for each of the first four full quarters
following the Effective Time, and (i) the delivery of certain documents and
certificates.
The Merger Agreement contains customary representations, warranties and
covenants by each party. The respective representations and warranties of the
parties are subject to certain important qualifications and limitations set
forth in confidential disclosure letters delivered by Anworth, on the one hand,
and Ready Capital, on the other hand, and were made solely for purposes of the
contract among the parties. The representations and warranties are subject to a
contractual standard of materiality that may be different from what may be
viewed as material to stockholders, and the representations and warranties are
primarily intended to establish circumstances in which either of the parties may
not be obligated to consummate the Merger, rather than establishing matters as
facts. In addition, the Merger Agreement provides that each of Anworth and Ready
Capital will, until the Effective Time, operate their respective businesses in
all material respects in the ordinary course and consistent with practice, and
preserve substantially intact its current business organization and preserve key
business relationships. Each of Anworth and Ready Capital are subject to
restrictions as specified in the Merger Agreement on certain actions each
company may take prior to the Effective Time, including, among other things,
actions related to amending organizational documents, declaring dividends,
issuing or repurchasing capital stock, engaging in certain business transactions
and incurring indebtedness.
The Merger Agreement provides for reciprocal "no-shop" provisions, which
prohibit each of Anworth, Ready Capital, and their respective subsidiaries from,
among other things, (a) initiating, soliciting or knowingly encouraging the
making of a competing proposal; (b) engaging in any discussions or negotiations
with any person with respect to a competing proposal; (c) furnishing any
non-public information regarding it or any of its subsidiaries, or access to its
properties, assets or employees in connection with a competing proposal; (d)
entering into a letter of intent or agreement in principle or other agreement
providing for a competing proposal; or (e) effecting a change of recommendation.
The no-shop provisions are subject to certain exceptions as more fully described
in the Merger Agreement, including the ability of Ready Capital or Anworth to
engage in the foregoing activities under certain circumstances in the event that
it receives a bona fide, unsolicited competing proposal.
At any time prior to obtaining the requisite stockholder approval, under certain
specified circumstances, the respective board of directors of each of Anworth
and Ready Capital may change its recommendation to its respective stockholders
regarding the Merger, or the issuance of shares of Ready Capital Common Stock,
as applicable, if such board of directors determines in good faith after
consulting with its legal and financial advisors that the failure to do so would
reasonably be likely to be inconsistent with such board of directors' legal
duties under applicable law, provided that the company intending to make the
change of recommendation complies with the procedures set forth in the Merger
Agreement. With respect to Anworth, if such change of recommendation is made in
response to a proposal that the board of directors of Anworth has determined in
good faith (after consultation with its legal and financial advisors) is a
"superior proposal", after taking into account any adjustment to the terms and
. . .
Item 5.01 Changes in Control of Registrant.
The information provided in Item 1.01 of this Current Report on Form 8-K is
incorporated in this Item 5.01 by reference.
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Item 9.01 Financial Statements and Exhibits.
(a) Not Applicable.
(b) Not Applicable.
(c) Not Applicable.
(d) Exhibits.
Exhibit Agreement and Plan of Merger, dated as of December 6, 2020, by
2.1 and among Ready Capital, Merger Sub, and Anworth*
Exhibit First Amendment to Management Agreement, dated as of December
10.1 6, 2020
Exhibit Cover Page Interactive Data File (embedded within the Inline XBRL
104 document)
* Schedules omitted pursuant to Item 601(b)(2) of Regulation S-K.
Anworth agrees to furnish a supplemental copy of any omitted schedule
to the SEC upon request.
Important Additional Information and Where to Find It
In connection with the proposed Merger, Ready Capital will file with the U.S.
Securities and Exchange Commission (the "SEC") a registration statement on Form
S-4 that will include a prospectus of Ready Capital and a joint proxy statement
of Anworth and Ready Capital. Anworth and Ready Capital also expect to file with
the SEC other documents regarding the Merger. The Merger will be submitted to
the stockholders of Anworth and Ready Capital for their consideration. The
definitive joint proxy statement/prospectus will be sent to the stockholders of
Anworth and Ready Capital, and will contain important information regarding the
proposed Merger and related matters. This Current Report on Form 8-K is not a
substitute for the registration statement and joint proxy statement/prospectus
that will be filed with the SEC or any other documents that Anworth or Ready
Capital may file with the SEC or send to their respective stockholders in
connection with the Merger. STOCKHOLDERS OF ANWORTH AND READY CAPITAL ARE
ADVISED TO READ THE REGISTRATION STATEMENT AND THE JOINT PROXY
STATEMENT/PROSPECTUS REGARDING THE MERGER WHEN THEY BECOME AVAILABLE (INCLUDING
ALL OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS
WELL AS ANY AMENDMENTS AND SUPPLEMENTS TO THESE DOCUMENTS) CAREFULLY AND IN
THEIR ENTIRETY BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT ANWORTH,
READY CAPITAL, THE PROPOSED MERGER, AND RELATED MATTERS. Stockholders of Anworth
and Ready Capital may obtain free copies of the registration statement, the
joint proxy statement/prospectus, and all other documents filed or that will be
filed with the SEC by Anworth or Ready Capital (when they become available) at
the SEC's website at http://www.sec.gov. Copies of documents filed with the SEC
by Anworth are will be made available free of charge on Anworth's website at
http://www.anworth.com, or by directing a request to its Investor Relations,
Attention: John T. Hillman at (310) 255-4438; email: jhillman@anworth.com.
Copies of documents filed with the SEC by Ready Capital will be made available
free of charge on Ready Capital's website at http://www.readycapital.com, or by
directing a request to its Investor Relations at (212) 257-4666; email:
InvestorRelations@readycapital.com.
This communication is for informational purposes only and 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 the 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.
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Participants in the Solicitation Relating to the Merger
Anworth, Ready Capital, and their respective directors and executive officers,
and certain other affiliates of Anworth or Ready Capital may be deemed to be
"participants" in the solicitation of proxies from the stockholders of Anworth
and Ready Capital in connection with the proposed Merger. Information regarding
Anworth and its directors and executive officers and their ownership of common
stock of Anworth can be found in Anworth's annual report on Form 10-K for the
fiscal year ended December 31, 2019 and in its definitive proxy statement
relating to its 2020 annual meeting of stockholders filed with the SEC on March
16, 2020. Information regarding Ready Capital and its directors and executive
officers and their ownership of common stock of Ready Capital can be found in
Ready Capital's annual report on Form 10-K for the fiscal year ended December
31, 2019 and in its definitive proxy statement relating to its 2020 annual
meeting of stockholders filed with the SEC on May 14, 2020. Additional
information regarding the interests of such participants in the Merger will be
included in the joint proxy statement/prospectus and other relevant documents
relating to the proposed Merger when they are filed with the SEC. Free copies of
these documents may be obtained from the sources described above.
Forward-Looking Statements
This Current Report on Form 8-K includes "forward-looking statements", as such
term is defined in Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended, and such statements are intended to
be covered by the safe harbor provided by the same. These forward-looking
statements are based on current assumptions, expectations and beliefs of Anworth
and Ready Capital and are subject to a number of trends and uncertainties that
could cause actual results to differ materially from those described in the
forward-looking statements. Neither Anworth nor Ready Capital can give any
assurance that these forward-looking statements will be accurate. These
forward-looking statements generally can be identified by phrases such as
"will", "expects", "anticipates", "foresees", "forecasts", "estimates" or other
words or phrases of similar import. Similarly, statements herein that describe
certain plans, expectations, goals, projections and statements about the
proposed Merger, including its financial and operational impact, the benefits of
the Merger, the expected timing of completion of the Merger, and other
statements of management's beliefs, intentions or goals also are forward-looking
statements. It is uncertain whether any of the events anticipated by the
forward-looking statements will transpire or occur, or if any of them do, what
impact they will have on the results of operations and financial condition of
the combined companies. There are a number of risks and uncertainties, many of
which are beyond the parties' control, that could cause actual results to differ
materially from the forward-looking statements included herein, including, but
not limited to, the risk that the Merger will not be consummated within the
expected time period or at all; the occurrence of any event, change or other
circumstances that could give rise to the termination of the Merger Agreement;
the possibility that stockholders of Anworth may not approve the Merger
Agreement; the possibility that stockholders of Ready Capital may not approve
the issuance of Ready Capital common stock in connection with the Merger; the
risk that the parties may not be able to satisfy the conditions to the Merger in
a timely manner or at all; risks related to disruption of management's attention
from ongoing business operations due to the proposed Merger; the risk that any
announcements relating to the Merger could have adverse effects on the market
price of common stock of Anworth or Ready Capital; the risk that the Merger and
its announcement could have an adverse effect on the operating results and
businesses of Anworth and Ready Capital generally; the outcome of any legal
proceedings relating to the Merger; the ability to successfully integrate the
businesses following the Merger; the ability to retain key personnel; the impact
of the COVID-19 pandemic on the business and operations, financial condition,
results of operations, and liquidity and capital resources of Anworth or Ready
Capital; conditions in the market for mortgage-related investments; changes in
interest rates; changes in the yield curve; changes in prepayment rates; the
availability and terms of financing; market conditions; general economic
conditions; and legislative and regulatory changes that could adversely affect
the business of Anworth or Ready Capital. All such factors are difficult to
predict, including those risks set forth in Anworth' annual reports on Form
10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K that are
available on its website at http://www.anworth.com and on the SEC's website at
http://www.sec.gov, and those risks set forth in Ready Capital's annual reports
on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K
that are available on Ready Capital's website at http://www.readycapital.com and
on the SEC's website at http://www.sec.gov. The forward-looking statements
included in this Current Report on Form 8-K are made only as of the date hereof.
Readers are cautioned not to place undue reliance on these forward-looking
statements that speak only as of the date hereof. Neither Anworth nor Ready
Capital undertakes any obligation to update these forward-looking statements to
reflect subsequent events or circumstances, except as required by applicable
law.
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