Item 2.01. Completion of Acquisition or Disposition of Assets.
On July 12, 2016, Annaly Capital Management, Inc. (“Annaly”) completed the previously announced acquisition of Hatteras Financial Corp. (“Hatteras”) pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of April 10, 2016, by and among Annaly, Hatteras and Ridgeback Merger Sub Corporation, a Maryland corporation and wholly-owned subsidiary of Annaly (“Purchaser”).
As previously disclosed, pursuant to the Merger Agreement, on May 5, 2016, Purchaser and Annaly commenced an exchange offer (the “Offer”) to purchase all of Hatteras’ issued and outstanding shares of common stock, par value $0.001 per share (the “Hatteras Common Shares”). In the Offer, subject to the terms and conditions and limitations set forth in the Merger Agreement, each Hatteras Common Share accepted by Purchaser was exchanged for the right to receive, at the election of the holder thereof (subject, in the case of elections of the All-Cash Consideration or All-Stock Consideration, to the proration procedures described in the Merger Agreement):
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$5.55 in cash and 0.9894 shares of Annaly common stock (the “Mixed Consideration”);
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$15.85 in cash (the “All-Cash Consideration”); or
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1.5226 shares of Annaly common stock (the “All-Stock Consideration”).
Holders of Hatteras Common Shares who tendered into the Offer but did not make a valid election received the Mixed Consideration for their Hatteras Common Shares.
The Offer expired at 5:00 p.m., Eastern Time, on July 11, 2016 (the “Expiration Time”). Computershare, the depositary and exchange agent for the Offer, advised Annaly that, as of the Expiration Time, a total of 70,066,823 Hatteras Common Shares had been validly tendered and not validly withdrawn pursuant to the Offer, which tendered Hatteras Common Shares represented approximately 74.12% of the issued and outstanding Hatteras Common Shares. Purchaser accepted for payment and exchange all such Hatteras Common Shares validly tendered and not validly withdrawn.
On July 12, 2016, pursuant to the terms of the Merger Agreement and in accordance with Section 3-106.1 of the Maryland General Corporation Law, Hatteras merged with and into Purchaser (the “Merger”), with Purchaser continuing as the surviving corporation. At the effective time of the Merger (the “Effective Time”), each Hatteras Common Share that was outstanding immediately prior to the Effective Time and not tendered pursuant to the Offer was converted into the right to receive (i) the Mixed Consideration, (ii) the All-Cash Consideration or (iii) the All-Stock Consideration, subject in each case to the election procedures and, in the case of elections of the All-Cash Consideration or All Stock Consideration, to the proration procedures described in the Merger Agreement.
At the Effective Time, each share of Hatteras 7.625% Series A Cumulative Redeemable Preferred Stock, par value $0.001 per share (“Hatteras Preferred Share”), that was outstanding as of immediately prior to the Effective Time was converted into one share of Annaly 7.625 Series E Cumulative Redeemable Preferred Stock, par value $0.01 per share (“Series E Preferred Shares”), which has the rights, preferences, privileges and voting powers substantially the same as a Hatteras Preferred Share immediately prior to the Effective Time.
The foregoing descriptions of the Offer, the Merger and the Merger Agreement are qualified in their entirety by reference to the Merger Agreement, a copy of which is filed as Exhibit 2.1 hereto and incorporated herein by reference.