UWM challenges Two Harbors board over rejection of $12 per share bid

UWM Holdings Corp. is challenging Two Harbors Investment Corp.’s board after it rejected a $12 per share acquisition proposal in favor of an $11.30  per share deal with CrossCountry Mortgage LLC, issuing a lengthy response that questioned the board’s analysis and process.

In a statement on Monday, UWM said “the TWO Board’s interpretation of the numbers don’t reflect the underlying math.” The company said the board is “contorting itself with illogical arguments to suggest otherwise, preventing TWO stockholders from even the opportunity to receive significantly higher value.”

Two Harbors’ board on Monday formally rejected UWM’s proposal and reaffirmed support for the $11.30 per share cash deal with CCM, citing “financing, closing, business and credibility risks” tied to UWM’s bid. According to UWM, its updated offer totals $12 per share, structured as $11.30 in cash plus an option for additional stock consideration.

UWM pushed back on the board’s description of closing risks, including references to potential balance sheet “erosion” and concerns about UWM’s credibility because its proposals have been accompanied by litigation threats. 

The bidder called the board’s stance “disingenuous,” noting that the same directors had recommended a transaction with UWM in December, “including by highlighting the ability to achieve necessary approvals.”

Two said UWM claimed the deal could close within two to three months of signing, but state regulatory requirements for change-of-control approvals mandate at least 120 days of advance notice, making the timeline unrealistic.

The Pontiac, Michigan-based wholesale lender said its offer is supported by a committed, unsecured $1.3 billion bridge facility from Mizuho Bank Ltd. “with no ratings trigger, no borrowing-base test, and no market contingency.” To address concerns raised by Two Harbors, UWM said “Mizuho has agreed to remove the customary due diligence condition that the TWO Board raised concerns about.”

“This is more than can be said for CrossCountry’s financing, which still contains scant details even in the most recent announcement and the Board deliberately fails to provide any details about it for obvious reasons,” UWM said.

UWM characterized the actions of the Two Harbors board as “egregious” and said they demonstrate the board “does not deserve TWO stockholder support for an inferior deal.”

“UWMC is assessing its options to make sure TWO stockholders are able to obtain the value they deserve,” the company added.