Annaly Capital Management, Inc. ("Annaly") (NYSE:NLY) and Hatteras Financial Corp. ("Hatteras") (NYSE:HTS) today announced the signing of a definitive merger agreement under which Annaly will acquire Hatteras for consideration to be paid in cash and shares of Annaly common stock, which values Hatteras at $15.85 per share of Hatteras common stock. In addition to the above consideration, Annaly would assume the existing notional $287.5 million in Hatteras 7.625% Series A cumulative redeemable preferred stock.
After the announcement, the common share of Hatteras jumped to $15.8 which implies the market expects the deal is highly likely to be closed. However, the preferred A share of HTS still has higher yield than the similar preferred share of NLY,as shown in the following table. The HTS PRA is very similar NLY PRC which is traded at $24.6 after adjusting the accrued coupon. So HTS PRA still has around $0.6 to run if they are traded at the same yield.