Quarterly report pursuant to Section 13 or 15(d)

Acquisition of CYS Investments, Inc. (Tables)

v3.10.0.1
Acquisition of CYS Investments, Inc. (Tables)
 9 Months Ended
Sep. 30, 2018
Acquisition of CYS Investments, Inc. [Abstract]  
Schedule of the calculation of the purchase price of CYS Investments, Inc. The total purchase price for the merger of $1.4 billion consists primarily of Two Harbors common stock issued in exchange for shares of CYS common stock and was calculated based on the closing price of Two Harbors common stock on July 31, 2018 of $15.50.
(dollars in thousands, except per share prices)
July 31,
2018
Common Stock Exchange:
 
 
 
CYS common stock outstanding
155,102,543

 
 
Common exchange ratio
0.4680

 
 
Two Harbors common stock to be issued
72,587,990

 
 
Less: fractional shares
218

 
 
Two Harbors common stock issued
72,587,772

 
 
Two Harbors share price
$
15.50

 
 
 
 
 
$
1,125,114

Cash in Lieu of Common Stock:
 
 
 
Fractional shares
218

 
 
Cash in lieu rate
$
15.59

 
 
 
 
 
$
3

Per Share Cash Consideration:
 
 
 
CYS common stock outstanding
155,102,543

 
 
Per share cash consideration
0.0965

 
 
 


 
$
14,967

 
 
 
 
Preferred Stock Exchange:
Shares
 
 
Series D preferred stock
3,000,000

 
$
75,000

Series E preferred stock
8,000,000

 
$
200,000

 
 
 
 
Total Purchase Price
 
 
$
1,415,084

Schedule of recognized identified assets acquired and liabilities assumed in acquisition of CYS Investments, Inc. The total purchase price for the merger including direct transaction costs, which exceeded gross assets acquired less liabilities assumed in the merger, was allocated to the individual assets acquired and liabilities assumed on a relative fair value basis, as shown below:
(in thousands)
July 31,
2018
Assets:
 
Available-for-sale securities, at fair value
$
10,034,557

Cash and cash equivalents
386

Restricted cash
1,062

Accrued interest receivable
30,646

Due from counterparties
21,572

Derivative assets, at fair value
314,811

Reverse repurchase agreements
761,460

Other assets
11,947

Total Assets
$
11,176,441

Liabilities:
 
Repurchase agreements
$
8,743,527

Derivative liabilities, at fair value
765,837

Due to counterparties
301,287

Accrued interest payable
27,487

Other liabilities
821

Total Liabilities
9,838,959

Stockholders’ Equity
 
Cumulative deficit (acquisition transaction costs)
(77,602
)
Total Stockholders’ Equity
$
(77,602
)
 
 
Total Purchase Price
$
1,415,084

Schedule of restructuring charges incurred in connection with the acquisition of CYS Investments, Inc. The Company also incurred the following charges in connection with the acquisition of CYS, which are included within restructuring charges on the Company’s condensed consolidated statements of comprehensive (loss) income, for the three and nine months ended September 30, 2018:
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
(in thousands)
2018
 
2018
Termination benefits
$
6,216

 
$
6,216

Contract terminations
979

 
979

Other associated costs
1,043

 
1,043

Total
$
8,238

 
$
8,238


The Company does not expect to incur additional restructuring costs related to the acquisition of CYS in 2018 or beyond.