Longbridge parent set to close on AAIC acquisition

The deal, first announced in May, is designed to boost Ellington Financial’s liquidity and accelerate scale

Ellington Financial Corporation, parent company of top 10 reverse mortgage lender and servicer Longbridge Financial, is expected to close a deal to acquire Arlington Asset Investment Corp. (AAIC) on Wednesday, Dec. 14.

Over 98% of shareholders voted to approve the merger of the two real estate investment trusts (REITs), according to an announcement issued by AAIC.

Following the shareholder approval on Wednesday, AAIC subsequently announced that it would voluntarily delist from the New York Stock Exchange (NYSE) to reflect the new corporate and shareholder structure of the combined company.

Upon closing the deal, Ellington will have an estimated equity capital base of $1.5 billion. The company is also acquiring roughly $13 billion in mortgage servicing rights (MSRs) with the acquisition.

“Arlington is taking this voluntary action to delist and deregister […] because Arlington believes that, following the anticipated closing of the merger, the costs of compliance, the demands on management’s time and the resources required to maintain the listing […] on the NYSE will exceed the benefits,” the company said.

Arlington shareholders will receive a $150 million deal facilitated through stock options and a cash payment. Ellington stock will convert each share of Arlington common stock into approximately 0.4 shares, and Arlington common stockholders will additionally be granted $0.09 per share, totaling $3 million.

“We are extremely excited about the opportunity to add a significant portfolio of assets – particularly low-coupon mortgage servicing rights – that align very well with our expertise and existing management platform,” said Ellington CEO Laurence Penn in May after the deal was announced.

“We believe that the benefits of this acquisition include greater operating efficiencies, a larger market capitalization, and attractive long-term unsecured debt and preferred equity capital. Upon closing, we believe that we will be positioned well to drive accretive earnings growth and provide strategic and financial benefits to our stockholders,” he added.

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