Two Harbors Investment Corp.’s roughly $11.30-a-share cash sale to CrossCountry Mortgage was set to close Monday but has been pushed back while the companies wait on approval from one remaining state regulator, according to a filing Two Harbors made with the Securities and Exchange Commission Monday.
The New York-listed mortgage REIT said in the 8-K that the merger will now close the day after it receives the final outstanding state approval, without specifying which state or offering a new target date. The deal had already cleared 48 of the 53 required state and agency approvals as it approached its original closing date.
A deal that beat out UWM
The sale caps months of competing bids for Two Harbors. CrossCountry Mortgage first agreed in March to acquire the company for $10.80 a share, a deal that displaced a previously announced merger agreement with UWM Holdings Corp. As part of walking away from UWM, CrossCountry agreed to cover a $25.4 million termination fee owed to UWM. CrossCountry then raised its offer to $11.30 a share in an amended agreement in April, and Two Harbors shareholders approved the higher bid on July 2. Two Harbors’ preferred stock — Series A, B and C — is set to be redeemed at $25 a share plus accumulated dividends once the deal closes.
The combination is designed to fold Two Harbors, a mortgage REIT, into CrossCountry Mortgage’s origination and servicing operations, creating a company that spans the full mortgage lifecycle from origination through servicing — a structure the companies have said should support higher customer retention and recurring revenue than either could generate alone.
Stub dividend gets recalculated
Monday’s filing also revised the “stub period” dividend Two Harbors will pay common shareholders to cover the partial third quarter before the merger closes. The company had initially set that payment at $0.12196 a share, calibrated to an Aug. 3 closing. With the closing now delayed, Two Harbors said the dividend will instead be calculated as $0.34 a share — its regular quarterly dividend rate — multiplied by the number of days between the end of the second quarter and the day before closing, divided by the 92 days in the third quarter. The dividend will be paid to shareholders of record as of the last trading day before the merger takes effect, concurrent with the main merger payout.
The filing was signed by Rebecca B. Sandberg, Two Harbors’ chief legal officer and secretary. It did not disclose which state’s approval remains outstanding or provide a revised closing date.
Two Harbors has traded as a publicly listed mortgage REIT, investing in residential mortgage-backed securities and mortgage servicing rights rather than originating loans directly. Folding that portfolio into CrossCountry, a privately held retail and wholesale lender, would give the combined company both a securities and servicing book and an origination arm under one roof — part of a broader trend in mortgage finance toward vertically integrated companies that control more of the loan lifecycle instead of relying on separate originators, servicers and investors.
What it means
Last-mile regulatory delays are common in bank and mortgage-company mergers that require sign-off from dozens of individual state regulators, and a one-state holdup after clearing 48 of 53 approvals is a narrow gap rather than a sign of trouble with the deal. The stub-dividend mechanics are a routine feature of all-cash M&A structured around a specific closing date; the recalculation simply ensures shareholders are paid for the actual number of days they held the stock before the deal closes, whatever that date turns out to be. What to watch: confirmation of the final state approval and a new closing date, which Two Harbors is required to disclose once set.
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