2014

Starwood Property Trust Announces Unconditional Offer to Acquire CreXus Investment Corp.

GREENWICH, Conn., March 28, 2011 /PRNewswire/ -- Starwood Property Trust (NYSE: STWD) today announced that it has made an unconditional offer  to acquire all of the outstanding shares of common stock of CreXus Investment Corp. (NYSE: CXS) for $14.00 per share. The proposal was formally made today in a letter to the CreXus Board of Directors. Terms of the proposed transaction call for Starwood Property Trust to exchange 0.61 shares of its common stock for each share of CreXus common stock outstanding. The offer represents a 20% premium over CreXus' trading price on the New York Stock Exchange of $11.68 at 11am on Monday, March 28, 2011.  The Company's offer is not subject to any financing condition, but is contingent on CreXus suspending its current equity offering. Starwood Property Trust is not aware of any material governmental or third party approvals or filings that would be required to consummate the transaction and the transaction will not require the vote of Starwood Property Trust's shareholders.  

Barry Sternlicht, Chairman and Chief Executive Officer of the Company, stated, "We believe our offer, which is at a substantial premium to CreXus' current stock price and above virtually all of CreXus' trading prices since its initial public offering in September 2009, represents a compelling opportunity for CreXus' stockholders.  CreXus stockholders would receive stock in a significantly more liquid entity without facing the substantial book value dilution of CreXus' pending equity offering. In addition, the combination of the platforms will be accretive to STWD's earnings, provide the potential for higher dividends for STWD and CreXus shareholders and allow shareholders of both companies to share in the cost savings and accretion created by the combination. This transaction will further increase the size of STWD's portfolio and further diversify our asset base, while providing economies of scale from a financing perspective."  

"CreXus recently announced the pending acquisition of a portfolio of loans from Barclays. The portfolio was unusual in that approximately $419 million of the $739 million face of loans matures prior to the end of 2011.  Based on the scale of CreXus' asset base, we would be concerned that the maturity of these loans would cause CreXus' dividend to fall, perhaps significantly, until new investments could be acquired or made.  STWD would be willing to complete the Barclays transaction but requires up to five business days to review the portfolio. The duration of the portfolio is less of an issue for STWD in light of our market capitalization and our proven ability to originate new loans having invested over $650 million in the last 100 days—76% of which was originated.  But, to be clear, the completion of the Barclay's transaction is not a condition to our offer for CreXus. We look forward to entering into discussions with CreXus in order to complete this transaction as soon as possible."

A copy of the Company's proposal to the Board of Directors of CreXus follows below.

About Starwood Property Trust, Inc.

Starwood Property Trust, Inc. (NYSE: STWD) is a commercial real estate finance company that is focused primarily on originating, investing in, financing and managing commercial mortgage loans and other commercial real estate-related debt investments. Starwood Property Trust, Inc. is externally managed and advised by SPT Management, LLC, an affiliate of Starwood Capital Group, and has elected to be taxed as a real estate investment trust for U.S. federal income tax purposes.

Forward Looking Statements

Statements in this press release which are not historical fact may be deemed forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Although Starwood Property Trust, Inc. believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from the Company's expectations include (i) our ability to successfully complete any proposed transaction or realize the anticipated benefits of a transaction, (ii) our completion of pending investments, (iii) the future performance of the Barclays assets, (iv) the fluctuation in the market value of our common stock, (v) the risk that the proposed transaction may not be completed in a timely manner, (vi) our continued ability to acquire additional investments and manage our existing investments in a successful manner, (vii) competition within the finance and real estate industries, (viii) economic conditions affecting the finance and real estate industries, including the level and volatility of interest rates (ix) and other risks detailed from time to time in the Company's reports filed with the SEC.

March 28, 2011

Sent Via Fax

Board of Directors

CreXus Investment Corp.

1211 Avenue Of The Americas

Suite 2902

New York, NY 10036

Ladies and Gentlemen:

Starwood Property Trust, Inc. ("Starwood") is pleased to submit this unconditional offer to acquire all of the outstanding shares of common stock of CreXus Investment Corp. ("CreXus") for $14.00 per share, based on a fixed exchange ratio of 0.61 shares of Starwood common stock per share of CreXus common stock.

We believe that the proposed transaction is an extremely attractive alternative for CreXus that enables CreXus shareholders to continue their investment in this asset class through the combination of our two companies.  Specifically, our offer:

  • Represents a 17% premium to CreXus' shares (based on both companies' closing price as of March 25, 2011)
  • Represents a premium to virtually all of CreXus' trading prices since its initial public offering
  • CreXus shareholders will earn a higher dividend following the consummation of the transaction
  • Creates a larger combined entity (which will be the largest U.S. commercial mortgage REIT by equity market capitalization), with a more diversified portfolio of assets and the financial scale to obtain attractive entity level financing
  • Offers enhanced liquidity to CreXus shareholders
  • Creates additional value for shareholders from cost synergies of scale and duplicative public company costs
  • Transaction intended to qualify as a tax-free exchange for CreXus shareholders

We would also emphasize that CreXus' scale and orientation to purchasing debt, as opposed to having an origination platform, have caused its shares to historically trade at a discount to book value. Starwood has increased dividends to its shareholders in every quarter since its formation in August 2009.    

For all the above reasons, we believe the proposed transaction is a materially superior alternative to CreXus' standalone prospects, particularly given the financial impact of the dilutive equity financing that CreXus is currently pursuing in connection with its agreement to acquire a portfolio of real estate assets from Barclays Capital Real Estate Inc. and Barclays Capital Real Estate Finance Inc. (together, "Barclays").  Our proposal is contingent upon CreXus suspending its current equity offering.  We are potentially supportive of the Barclays transaction and intend to help CreXus honor its obligations, if possible, but believe there are alternative financing options that would not take the form of a dilutive issuance of CreXus stock.  With respect to the Barclays transaction, we could complete diligence in less than five business days.  However, our offer for CreXus is not contingent upon the consummation of the Barclays transaction.

We intend to implement the proposed transaction so that CreXus would become a wholly owned subsidiary of Starwood.  Our desire is to achieve this result through a transaction that is supported by the CreXus board and we are prepared to immediately enter into customary definitive documentation.  

Given our extensive experience and knowledge of CreXus we are confident we can complete the proposed transaction in an expedited manner.  Our proposal is not subject to diligence or any financing condition, and we are not aware of any material governmental or third party approvals or filings that would be required to consummate the transaction.  This proposal has the full support of our Board of Directors and will not require a vote of our shareholders.  We have also engaged Citigroup Global Markets Inc. as financial advisor and Wachtell, Lipton, Rosen & Katz as legal advisor for the proposed transaction.  

We welcome the opportunity to meet with the CreXus board and/or its advisors as soon as possible to discuss our proposal.

In light of the significance of this proposal to your shareholders and the expected timing of your dilutive offering, and because we wish to be sure that your shareholders are fully informed about the proposal we are making, we intend to publicly release the text of this letter by 11am New York time if we do not hear from you sooner.

 We look forward to your response.

 Sincerely,

Barry S. Sternlicht

 Chairman and Chief Executive Officer

SOURCE Starwood Property Trust



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