Business Context and Reporting Period
Company: AG Mortgage Investment Trust, Inc. (MITT)
Filing Type: Form 8-K (Current Report)
Date of Report: August 8, 2023
Event: Entry into a Material Definitive Agreement (Merger) with Western Asset Mortgage Capital Corporation (WMC).
Key Financial Metrics and Transaction Terms
This filing details a merger agreement rather than periodic financial results. Key financial terms include:
- Merger Consideration: Each outstanding share of WMC common stock converts into 1.50 shares of MITT common stock plus a cash payment.
- Cash Component: A cash payment from MITT Manager equal to the lesser of $7,000,000 or approximately 9.9% of the aggregate Per Share Merger Consideration.
- Termination Fee Paid: MITT paid a $3,000,000 termination fee to Terra Property Trust, Inc. (TPT) upon WMC terminating its prior merger agreement with TPT.
- Management Fee Waiver: MITT Manager will waive $2,400,000 of management fees owed in the first year post-closing.
- Future Fee Reductions: Upon closing, MITT Manager's base management fee will be reduced by $600,000 for the first four quarters.
- Transaction Expenses: WMC's transaction expenses exclude the $7,000,000 termination fee payable to its existing manager, accrued fees, transfer taxes, D&O tail policy costs, and the TPT Termination Fee.
Note: The filing text does not provide current revenue, profit, cash flow, margins, debt, or liquidity figures for MITT or WMC.
Material Changes and Conditions
The primary material change is the execution of the Merger Agreement, replacing WMC's previous agreement with Terra Property Trust, Inc. The transaction is subject to several conditions, including:
- Approval by a majority of WMC stockholders.
- Approval by a majority of votes cast by MITT stockholders.
- Effectiveness of the SEC Registration Statement (Form S-4).
- Listing of MITT common stock on the NYSE.
- Appointment of two WMC director designees to the MITT board.
- Absence of a material adverse effect on either party.
Guidance, Risks, and Contingencies
Outlook and Timeline: The Merger Agreement includes a termination date of May 2, 2024, if the transaction is not completed by then. MITT expects to file a joint proxy statement/prospectus with the SEC.
Termination Fees and Contingencies:
- If WMC terminates due to a change of recommendation or superior proposal, WMC must pay MITT a $3,000,000 termination fee.
- If MITT terminates under similar circumstances, MITT must pay WMC a $6,000,000 termination fee.
- If either party fails to obtain stockholder approval, the failing party must reimburse the other for transaction expenses (capped at $2,000,000 for WMC and $1,000,000 for MITT).
Risks: Risks include failure to obtain stockholder approval, inability to complete the merger on anticipated terms, diversion of management attention, integration difficulties, and potential stockholder litigation.
Investor Verification Checklist
- Verify the final terms of the merger in the upcoming Form S-4 Registration Statement and joint proxy statement/prospectus.
- Confirm the outcome of the stockholder votes required for both MITT and WMC.
- Monitor the status of the SEC's declaration of effectiveness for the Registration Statement.
- Review the impact of the $3,000,000 termination fee paid to Terra Property Trust on MITT's immediate cash position.
- Assess the potential for a "superior proposal" that could trigger a change of recommendation or termination fees.