New York-based Ready Capital Corp., a multi-strategy real estate finance company that originates, acquires, finances and services small to medium-sized balance commercial loans, has entered into a definitive merger agreement to combine in a stock-for-stock merger with Owens Realty Mortgage Inc., a specialty finance REIT that focuses on the origination, investment and management of small-balance and middle-market commercial real estate loans.
According to a prepared statement, the combined company, which will operate under the name Ready Capital, is expected to have pro forma equity capital in excess of $750 million. The combination will enhance shareholder liquidity and provide for operating leverage across the larger equity base.
Under the terms of the agreement, each ORM share will be converted into 1.441 Ready Capital shares, based on a fixed exchange ratio. The exchange ratio is subject to certain adjustments if either company’s book value per share, as defined in the merger agreement, declines by more than 3%. The all-stock merger is intended to be a tax-free transaction. Upon the closing of the transaction, Ready Capital stockholders are expected to own approximately 72% percent of the combined company’s stock, while Owens Realty Mortgage stockholders are expected to own approximately 28% percent of the combined company’s stock.
Based on the closing prices of ORM common shares and Ready Capital’s common stock on November 7, 2018, the equity market capitalization of the combined company would be approximately $678 million. The combined company’s shares are expected to continue trading on the New York Stock Exchange under the ticker symbol for Ready Capital.
“This merger highlights our continued commitment to driving shareholder value and liquidity. We believe the transaction raises incremental capital with minimal tangible book value dilution and is accretive to forward looking earnings per share,” stated Ready Capital Chairman and Chief Executive Officer Thomas Capasse. “The combined company will be in a stronger position to execute our business plan, improve operating and cost efficiencies and continue growth in a profitable manner.”
Bryan Draper, President of ORM, commented “We are excited to have reached an agreement for the sale of Owens Realty Mortgage to Ready Capital and believe that our shareholders will benefit from the better access to financing, larger size and greater resources of the combined company.”