Annaly Capital Management Inc (NLY.N) will gain control of CreXus Investment Corp CXS.N after raising its offer for the remaining 88 percent stake in the commercial mortgage investor.
Shares of CreXus, which invests mainly in commercial mortgage loans and commercial mortgage-backed securities, rose 6 percent in early trade on Thursday.
Annaly raised its offer by 50 cents to $13 per share, or $872 million, as it looks to add a line of business that will help cushion any blows from the U.S. Federal Reserve's latest round of bond buying.
"This transaction represents a significant step toward Annaly's commitment to investing directly in commercial real estate assets," Annaly's Chief Executive Wellington Denahan said in a statement.
Annaly, known for its big dividends, typically borrows short term at low rates and buys mortgage-backed securities (MBS) guaranteed by agencies such as Fannie Mae and Freddie Mac.
However, the company's interest income took a big hit after the Fed in September began to mop up $40 billion of agency mortgage-backed securities every month under the third round of its quantitative easing program.
The Fed's bond buying flattened the yield curve, compressing the company's interest rate spreads by a whopping 52 basis point to 1.02 percent in the third quarter from the second quarter.
The deal, which has been approved by the CreXus board, values the company at about $996 million.
Annaly, the largest mortgage REIT listed on the New York Stock Exchange, had in November offered $12.50 for each CreXus share, then a 13 percent premium.
Annaly said the deal would immediately add to both its earnings per share and dividends.
Lazard advised CreXus, while Bank of America Merrill Lynch advised Annaly.
Annaly shares were flat at $14.98 on the New York Stock Exchange.
(Reporting by Aman Shah and Anil D'Silva in Bangalore; Editing by Sreejiraj Eluvangal and Sriraj Kalluvila)