Hatteras Financial Corp. (NYSE:HTS) has announced the termination of a management agreement with Atlantic Capital Advisors LLC. The development follows Hatteras’ decision to sell itself to Annaly Capital Management, Inc. (NYSE:NLY) for $1.5 billion. Atlantic had been Hatteras’ external manager after the two entities entered into a management agreement in 2012 that was later amended earlier this year.
Hatteras Financial disclosed the termination of the management agreement with Atlantic in a security filing. But the termination of the management contract came at a big cost to Hatteras. The company said it paid more than $45.4 million in termination fees to Atlantic.
Acquisition by Annaly
The decision to terminate the management agreement with Atlantic and to pay for the termination fee came after Hatteras sold itself to Annaly in a transaction valued at $1.5 billion. Annaly decided to acquire all the issued and outstanding shares of Hatteras through an exchange offer.
At the close of the offer period early this week, more than 70 million common shares of Hatteras Financial had been tendered, thus giving Annaly the opportunity to become the new owner of Hatteras.
Cash and stock transaction
Annaly’s buyout offer to Hatteras Financial shareholders involved a combination of cash and stock available in three options. Hatteras shareholders who chose the all-cash consideration received $15.85 per share. Those who settled for all-stock consideration received 1.5226 shares of Annaly for every share of Hatteras owned. The third option was a mixed-consideration where those who settled for it received a combination of cash and stock. The cash component in the Mixed-consideration was $5.55 per share of Hatteras and the stock component was 0.9894 shares of Annaly for every share of Hatteras owned.
The acquisition now ends Hatteras’ eight years as a publicly traded company and reduces it to a subsidiary of Annaly.
Hatteras Financial logged a $77.4 million loss in 2015 in a year that the management described as challenging.