UPDATE 2-Annaly Capital to buy CreXus Investment for $840 mln

Mon Nov 12, 2012 10:17am EST

* Annaly to pay $12.50 per share, premium of 13 pct

* CreXus shares up 12 pct in morning trade

Nov 12 (Reuters) - Mortgage-backed REIT Annaly Capital Management Inc will spend about $840 million to buy the shares of CreXus Investment Corp that it does not already own.

Annaly, the largest mortgage REIT listed on the New York Stock Exchange, will pay $12.50 per share, a premium of 13 percent to CreXus's Friday closing price.

Annaly already owns about 12 percent of CreXus, which is valued at $958 million based on the offer price.

Shares of Crexus, which acquires, manages and finances commercial mortgage loans, were up 12 percent at $12.42 in early trading on the New York Stock Exchange.

CreXus, which is also structured as a real estate investment trust (REIT), is managed by Annaly's wholly owned subsidiary, Fixed Income Discount Advisory Co (FIDAC).

The U.S. mortgage market has been showing signs of recovery since September when the Federal Reserve announced a third round of quantitative easing to aid the economy, driving down home loan rates and making it more attractive for borrowers to refinance.

The Fed announced open-ended purchases of $40 billion of mortgage-backed bonds a month until it saw a substantial improvement in the outlook for the U.S. labor market. The news spurred refinancing activity to a four-year high.

Two of FIDAC's employee are on the CreXus board. Annaly said it expected CreXus to form a special committee of independent directors to consider its proposal.

A REIT is a real estate-linked company that can avoid paying U.S. corporate income taxes if it distributes at least 90 percent of its taxable income to shareholders.

BofA Merrill Lynch was the financial adviser to Annaly.

Annaly's shares were up almost 1 percent at $15.10.