Ellington Financial acquires Great Ajax Corp.

This follows Ellington's AAIC acquisition in May 2023 and its Longbridge acquisition, which closed last year

Ellington Financial (EFC), the parent company of Longbridge Financial, announced this week that it has entered into a merger agreement with real estate investment trust (REIT) Great Ajax Corp., which primarily invests in residential mortgage loans.

Under the merger agreement, Ellington will acquire Great Ajax. Each share of Great Ajax common stock will be converted into just over one-half of a share of Ellington Financial common stock, or “approximately 12.5 million shares of Ellington Financial common stock in the aggregate,” the companies said in an announcement.

The current per-share price of EFC is $7.33 as of June 30, which “implies an offer price of $7.33 per share of Great Ajax common stock, representing an approximate 19% premium to the Great Ajax common stock closing price on the NYSE on June 30, 2023,” according to the announcement.

When the transaction closes, EFC stockholders are expected to own 84% of the combined company’s stock, while Great Ajax stockholders are expected to own the remainder. The company will assume EFC’s name and ticker symbol.

“We believe that the benefits of this acquisition also include greater operating efficiencies, a larger market capitalization, and a closer relationship with Gregory Funding, Great Ajax’s highly respected affiliated mortgage servicer,” said Ellington Financial CEO Larry Penn in a statement. “We believe that this transaction will position us well to drive accretive earnings growth and provide strategic and financial benefits to our stockholders.”

The combined entity should prove valuable for the company and shareholders, said Great Ajax Corp. Chairman and CEO Lawrence Mendelsohn.

“We are pleased to combine our investment portfolios and create a company that we believe will be well positioned for growth and value creation,” Mendelsohn said. “We look forward to working closely with the Ellington Financial team to complete the transaction and deliver value for our stockholders.”

Ellington acquired REIT Arlington Asset Investment Corp. (AAIC) in May, a deal that has the potential to boost the company’s liquidity and expand its scale, according to a joint statement from the companies. Valued at over $150 million, the deal will be facilitated with stock options and a cash payment to current Arlington shareholders.

Longbridge has originated 4,220 HECMs in the 12-month period ending in June 2023, according to Reverse Market Insight (RMI). Ellington announced it would acquire Longbridge in February 2022 and closed the deal the following October.

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