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ACQUISITION OF MTGE INVESTMENT CORP | 9 Months Ended
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Sep. 30, 2019
Business Combinations [Abstract] |
ACQUISITION OF MTGE INVESTMENT CORP |
22. ACQUISITION OF MTGE INVESTMENT CORP.
On September 7, 2018, Mountain Merger Sub Corporation, a wholly-owned subsidiary of the Company, completed its acquisition of MTGE Investment Corp. (“MTGE”), an externally managed hybrid mortgage REIT, for aggregate consideration to MTGE common shareholders of $906.2 million, consisting of $455.9 million in equity consideration and $450.3 million in cash consideration (the “MTGE Acquisition”). The Company issued 43.6 million shares of common stock as part of the consideration for the MTGE Acquisition. In addition, as part of the MTGE Acquisition, each share of MTGE 8.125% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share (each, a “MTGE Preferred Share”), that was outstanding as of immediately prior to the completion of the MTGE Acquisition was converted into one share of a newly-designated series of the Company’s preferred stock, par value $0.01 per share, which the Company classified and designated as Series H Preferred Stock, and which have rights, preferences, privileges and voting powers substantially the same as a MTGE Preferred Share. The MTGE Acquisition was accounted for as an asset acquisition in accordance with Accounting Standards Codification 805 Business Combinations (“ASC 805”). Under ASC 805, an acquisition does not qualify as a business combination if the acquisition does not meet the definition of a business. GAAP defines a business as an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs, or other economic benefits directly to investors or other owners, members, or participants. Since the Company did not acquire the external management agreement with the MTGE’s third party manager, there were no substantive processes acquired as part of the acquisition. Therefore, the MTGE Acquisition was not considered a business combination. Under ASC 805, an asset acquisition is accounted for under the cost accumulation model which allocates the cost of the acquisition which generally includes direct transaction costs to the individual assets acquired and liabilities assumed on the basis of relative fair value with certain exceptions including financial assets and current assets. These exceptions are excluded from the cost accumulation method since recognizing these assets at amounts other than their fair value would result in a subsequent gain or loss upon re-measurement.The allocation of the consideration paid as part of the transaction and its assignment to the initial carrying value of the MTGE portfolio is noted in the below table.
| September 2018
Consideration transferred | (dollars in thousands)
Cash | $ | 450,287 |
Common equity | 455,943 |
Preferred shares |
Exchange of MTGE preferred stock for Annaly preferred stock | 55,000 |
Total consideration | $ | 961,230 |
Net assets |
Cash and cash equivalents | $ | 191,953 |
Securities | 4,111,930 |
Real estate, net | 277,648 |
Derivative assets | 18,629 |
Reverse repurchase agreements | 938,251 |
Receivable for unsettled trades | 6,809 |
Principal receivable | 44,462 |
Interest receivable | 14,282 |
Intangible assets, net | 14,483 |
Other assets | 50,105 |
Total assets acquired | 5,668,552 |
Repurchase agreements | 3,561,816 |
Mortgages payable | 201,629 |
U.S. Treasury securities sold, not yet purchased | 934,149 |
Derivative liabilities | 2,498 |
Interest payable | 22,220 |
Dividends payable | 819 |
Other liabilities | 28,715 |
Total liabilities assumed | 4,751,846 |
Net assets acquired | $ | 916,706 |

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