CrossCountry ups TWO offer in bidding war with UWM

CrossCountry Mortgage is sweetening its deal for Two Harbors as it continues to best United Wholesale Mortgage’s offer.

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The retail player Thursday said TWO stockholders will receive a pro-rated dividend for the quarter in which CrossCountry’s acquisition closes, subject to funds being legally available. The move would provide additional cash value of up to $0.34 per share to TWO stockholders, the lender said. 

Assuming a third quarter closing, CrossCountry would deliver a total cash value of around $12.45 to $12.68 per share to all TWO stockholders. The announcement follows the Two Harbor Board of Directors on Wednesday rejecting UWM’s offer of $12.50 per share.

The new dividend offering represents “real, binding cash value on an accelerated path to closing, compared to UWM Holding Corporation’s highly uncertain, non-binding proposal that lacks sufficient committed financing to fund the full purchase price,” CrossCountry said. 

UWM’s competing deal would also default non-electing TWO stockholders into UWM parent company stock “worth materially less,” the press release continued. 

Besides its cash offer, UWM hasn’t changed its proposal of 2.3328 UWM shares for each of Two Harbors. As of Thursday afternoon, UWM’s stock was trading at $3.06 per share, down five cents from the prior day’s closing price; TWO’s stock was trading at $12.58 per share, up six cents from market close Wednesday. 

The privately owned, Cleveland-based CrossCountry stepped into UWM’s pending deal for the servicer in March, and the megalenders have tussled for control of the servicer since then. Two Harbors has since rejected UWM’s advances, and questioned the wholesale leader’s motivations as it “has never bought MSR from anyone.”

In a press release Thursday afternoon, UWM called the latest dividend offer a “smoke and mirrors ploy,” as the servicer is not acknowledging the same dividend would be payable if the CrossCountry deal didn’t go through.

The competing bidder also said TWO’s board continues to refuse to engage with UWM except for press releases, and insisted its offer was superior.

“It seems there is no limit to the lengths the TWO Board will go to protect a management-enriching deal with their preferred partner while ignoring their fiduciary duty to stockholders,” said UWM in a statement.

Vote approaches

CrossCountry’s latest per-share dividend will be determined by a formula, based on the specific timing of the actual closing. The lender, in touting its offer’s strength versus UWM’s, said it’s already acquired 39 of 53 required approvals. 

Two Harbors will hold a special meeting Tuesday to vote on the CrossCountry merger.

The Pontiac, Michigan-based lender and servicer recently trumpeted a report by Institutional Shareholder Services, which has recommended TWO shareholders vote against the CrossCountry deal, as the company can still have more productive discussions with the firms.

Two Harbors meanwhile recently cited the same ISS report calling the CrossCountry offer “compelling.”