United Wholesale Mortgage (UWM) has intensified its pursuit of Two Harbors Investment Corp, raising its offer to $12 per share in cash or 2.3328 shares of UWM Class A common stock, with no cap or proration on the cash election. The revised bid, disclosed in an open letter to Two Harbors shareholders, marks a significant escalation in the takeover battle for the mortgage real estate investment trust.
The new offer provides Two Harbors investors with a clear premium over the mortgage REIT's recent trading price, which had been hovering below $10 per share. UWM's move comes as the wholesale mortgage lender seeks to expand its footprint in the mortgage servicing and investment space through an acquisition that would combine its origination platform with Two Harbors' portfolio.
The bid structure is notable for its flexibility, allowing shareholders to choose between receiving cash or stock without any limitations on the cash election. This contrasts with typical tender offers that often cap the cash component, potentially making UWM's proposal more attractive to institutional investors seeking immediate liquidity.
Two Harbors has not yet publicly responded to the revised offer, though analysts at KBW have weighed the risks of the deal, noting potential integration challenges and the cyclical nature of mortgage REIT earnings. The mortgage REIT's board is expected to evaluate the proposal in the coming days.
Counter_argument: Some analysts caution that the $12 offer may still undervalue Two Harbors' long-term earnings power, particularly if interest rates stabilize and mortgage spreads tighten, and that regulatory hurdles could complicate the merger. The open letter tactic may also signal impatience rather than a negotiated agreement, which could sour shareholder sentiment.