Ellington Financial to acquire Great Ajax for $7.33 per share

Ellington Financial (EFC) and Great Ajax Corp. (AJX) have entered into a definitive merger agreement pursuant to which Ellington Financial will acquire Great Ajax. The transaction is expected to close by year-end 2023. Pursuant to the merger agreement terms, each share of Great Ajax common stock will be converted into 0.5308 shares of Ellington Financial common stock, or approximately 12.5M shares of Ellington Financial common stock in the aggregate. Ellington Financial’s common stock closing price on the New York Stock Exchange on June 30, 2023 implies an offer price of $7.33 per share of Great Ajax common stock, representing an approximate 19% premium to the Great Ajax common stock closing price on the NYSE on June 30, 2023. Upon the closing of the transaction, Ellington Financial stockholders are expected to own approximately 84% of the combined company’s stock, while Great Ajax stockholders are expected to own approximately 16% of the combined company’s stock. In addition, Ellington Financial will assume Great Ajax’s outstanding senior unsecured notes and convertible senior notes. The combined company will operate as “Ellington Financial Inc.” and its shares will continue to trade on the NYSE under Ellington Financial’s current ticker symbol, “EFC.” Ellington Financial Management LLC, an affiliate of Ellington Management Group, L.L.C., will continue to manage the combined company. Great Ajax’s investment portfolio includes over $1B of first-lien residential re-performing loans and non-performing loans, most of which are financed through term, non-mark-to-market, non-recourse securitizations, which would significantly expand Ellington Financial’s current RPL/NPL strategy. Combining Ellington Financial’s hedging, trading, and structuring capabilities with Great Ajax’s whole loan asset management resolution expertise is expected to create a unique platform that will optimize Great Ajax’s portfolio and deliver greater returns to shareholders. Great Ajax’s strategic equity investment in Gregory Funding LLC, its affiliated servicer, is expected to unlock multiple synergies and operating efficiencies across Ellington Financial’s investment portfolio. Estimated pro forma market capitalization in excess of $1B, which is expected to enhance liquidity for both Ellington Financial and Great Ajax shareholders. Anticipated increase in operating expense efficiencies resulting from fixed expenses spread over a larger equity base. Ellington Financial expects to rotate out of selected lower-yielding Great Ajax assets and redeploy capital in higher-yielding strategies. The transaction is expected to be accretive to earnings within one year of closing. Upon completion of the transaction, Ellington Financial’s CEO and President, Laurence Penn, will continue to lead the combined company, and Ellington Financial executives Michael Vranos, Mark Tecotzky, and JR Herlihy will remain in their current roles. The combined company will remain headquartered in Old Greenwich, Connecticut. The transaction has been unanimously approved by the Boards of Directors of Ellington Financial and Great Ajax. The Board of Directors of Great Ajax formed a Special Committee comprised of independent directors to review the transaction and make a recommendation to the Board of Directors of Great Ajax. The transaction was unanimously recommended by the Special Committee. The transaction is expected to close by the end of 2023, subject to approval by Great Ajax’s stockholders and other closing conditions set forth in the merger agreement.