Two Harbors Investment Corp (NYSE:TWO) shares jumped 13% on Thursday after the company disclosed it had received an unsolicited cash acquisition proposal valuing its equity at $10.70 per share. The prospective buyer's offer specifically includes payment of the $25.4 million termination fee that Two Harbors would owe to UWM Holdings Corporation (NYSE:UWMC) to terminate their existing merger agreement.
An ad hoc committee of Two Harbors' Board reviewed the unsolicited proposal and determined that it could reasonably be expected to lead to a "Company Superior Proposal" as that term is defined in the UWMC merger agreement. The committee said it has not yet concluded whether the proposal is in fact superior to the transaction with UWMC.
Two Harbors plans to continue engagement on definitive documentation to ascertain whether the unsolicited bidder's terms can produce a "Company Superior Proposal." If the company determines a proposal meets that standard, the UWMC agreement provides UWMC with a three business day window to negotiate and submit revisions to its transaction.
Despite the new unsolicited cash offer, the UWMC merger agreement remains in force. The Board reiterated its continuing recommendation of the UWMC transaction and has not withdrawn or amended that recommendation. The Special Meeting of Stockholders tied to the UWMC transaction remains scheduled for March 24, 2026.
The unsolicited cash bid stands in contrast to UWMC's all-stock proposal. Based on UWMC's most recent closing price of $3.69 and a fixed exchange ratio of 2.3328 shares, UWMC's proposal would have provided Two Harbors shareholders approximately $8.60 per share in value.
Market participants and advisors weighed in on the competing offers. Jones Trading analyst Jason Weaver, who maintains a Hold rating on Two Harbors, said, "We believe the unsolicited offer of $10.70 per share in cash is a superior offer to UWMC. We note that the new offer is more attractive given the all cash nature versus the prior offer to receive UWMC class A shares. With TWO BVPS of $11.13 as of 12/31 and the expectation that BVPS has marginally declined QTD due to modest spread widening, we believe the all cash offer of $10.70 is superior."
Two Harbors has engaged Houlihan Lokey Capital as its financial advisor for this process, and Jones Day is serving as the company's outside legal counsel.
Key takeaways
- Two Harbors disclosed an unsolicited $10.70 per share cash acquisition proposal that includes payment of a $25.4 million termination fee related to its UWMC merger agreement.
- An ad hoc Board committee concluded the proposal could reasonably be expected to lead to a "Company Superior Proposal," but no determination has yet been made that it is superior to the UWMC transaction.
- The UWMC all-stock transaction remains recommended by the Board and the special stockholder meeting is scheduled for March 24, 2026.
Risks and uncertainties
- It remains undetermined whether the unsolicited proposal will be formally declared a "Company Superior Proposal," leaving the outcome of any competing offers uncertain.
- UWMC will have a contractual three business day period to respond with negotiations or revisions if the company determines a proposal is superior, creating an uncertain and potentially time-limited negotiation window.
- The Board continues to recommend the UWMC transaction while evaluating the unsolicited offer, so shareholders face the risk of parallel processes and competing recommendations ahead of the March 24, 2026 shareholder meeting.