Two Harbors Investment Corp.’s Acquisition of CYS Investments, Inc.


JMP Securities LLC is serving as financial advisor, and Sidley Austin LLP is serving as legal advisor to Two Harbors. Barclays Capital Inc. and Credit Suisse Securities (USA) LLC are serving as financial advisors, and Vinson & Elkins LLP is serving as legal advisor to CYS.

Two Harbors Investment Corp . (NYSE: TWO), a leading hybrid mortgage real estate investment trust (“REIT”), and CYS Investments, Inc . (NYSE: CYS), an Agency mortgage REIT, have entered into a definitive merger agreement under which Two Harbors will acquire CYS.

In connection with the merger, CYS stockholders will exchange their shares of CYS common stock for newly issued shares of Two Harbors common stock as well as aggregate cash consideration of $15,000,000. The number of Two Harbors shares issued will be based on an exchange ratio to be determined by dividing 96.75% of CYS’ adjusted book value per share by 94.20% of Two Harbors’ adjusted book value per share. For illustrative purposes, assuming the merger occurs and the exchange ratio was based on March 31, 2018 adjusted book value per share, CYS stockholders would receive $7.79 of combined cash and stock consideration per share of CYS common stock owned, which represents a premium of approximately 17.7% over the CYS closing price per share on April 25, 2018. The actual exchange ratio for the merger will be publicly announced at least five business days prior to the required stockholder votes on the merger.


CYS Investments, Inc. is a specialty finance company that was created with the objective of achieving consistent risk-adjusted investment income. The Company, led by Kevin E Grant, Jack DeCicco and Richard E Cleary, invests on a leveraged basis exclusively in whole-pool residential mortgage pass-through securities for which the principal and interest payments are guaranteed. In 2017 the firm recorded $348 Million Revenues.

Two Harbors Investment Corporation is a real estate investment trust (REIT). The Company, led by Brian C Taylor, Thomas E Siering and Brad Farrell, focuses on investing in, financing, and managing residential mortgage-backed securities, RMBS, and related investments. In 2017, Harbors Investment Corporation recorded $778 Million revenues.

Sidley represented Two Harbors Investment Corp., with Christian Brause (Picture), Scott Freeman (Partner, New York), Gabriel Saltarelli (Partner, New York), Katherine Chen (Associate, New York), Katharine Funkhouser (Associate, Chicago), Robert Garritano (Associate, New York), and Robert Hardy (Counsel, New York).

Vinson & Elkins advised CYS Investments, Inc. with a team including Greg Cope and Steve Gill, senior associate Justin Hunter and associate Yong Eoh, with assistance from associates Caroline Bailey, Sheldon Nagesh, Brittany Smith, Greg Henson and Michael Pascual. Also advising were partner Chris Mangin and associates Paige Anderson and Virginia Blanton; partner David D’Alessandro, senior associate Dario Mendoza and associate Steve Oyler; partner David Wicklund; and partner Michael Holmes.

Involved fees earner: Gregory Cope – Vinson & Elkins LLP; Stephen Gill – Vinson & Elkins LLP; Yong Eoh – Vinson & Elkins LLP; Brittany Smith – Vinson & Elkins LLP; Gregory Henson – Vinson & Elkins LLP; Michael Pascual – Vinson & Elkins LLP; Justin Hunter – Vinson & Elkins LLP; Caroline Lamberti Bailey – Vinson & Elkins LLP; Sheldon Nagesh – Vinson & Elkins LLP; Christopher Mangin Jr. – Vinson & Elkins LLP; Paige Anderson – Vinson & Elkins LLP; Virginia Blanton – Vinson & Elkins LLP; David D’Alessandro – Vinson & Elkins LLP; Dario Mendoza – Vinson & Elkins LLP; Steven Oyler – Vinson & Elkins LLP; David Wicklund – Vinson & Elkins LLP; Michael Holmes – Vinson & Elkins LLP; Christian Brause – Sidley Austin LLP; Gabriel Saltarelli – Sidley Austin LLP; Katharine Funkhouser – Sidley Austin LLP; Robert Hardy – Sidley Austin LLP;

Law Firms: Vinson & Elkins LLP; Sidley Austin LLP;

Clients: Two Harbors Investment Corporation; CYS Investments Inc.;

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Author: Ambrogio Visconti