A revised proposal from UWM Holdings Corporation to acquire Two Harbors Investment Corp. was formally rejected by the seller’s board of directors, citing “financing, closing, business and credibility risks.” The board continues to unanimously support the competing bid from CrossCountry Mortgage, LLC.
In late April, UWM intensified its campaign to acquire TWO by issuing an open letter to the company’s shareholders. The letter detailed an offer of $12 per share — payable in cash or UWM stock, at the shareholder’s discretion — and positioned the bid as superior to the pending $11.30 all-cash sale to CCM.
However, Two Harbors noted that the share conversion serves as the default choice, estimating that 25% to 30% of shareholders would likely default into receiving stock rather than cash.
“The CCM transaction delivers $11.30 per share in certain, immediate, all-cash consideration to every TWO stockholder – automatically, with committed financing, no financing contingency and a clear path to closing in the third quarter of 2026,” TWO board said.
“In sharp contrast, UWMC’s headline cash election number of $12.00 per share is available only to stockholders who affirmatively elect cash during a future election window; stockholders who do not take action to elect cash will, by default, receive UWMC stock currently worth approximately $8.54 per share.”
Meanwhile, CCM founder and CEO Ron Leonhardt has been actively campaigning to close the deal, visiting four of the seller’s offices to meet with TWO employees and engaging in comprehensive integration planning. Speaking on stage at HousingWire’s The Gathering in Austin, Texas, on Wednesday, Leonhardt emphasized that his firm is “pot committed” to the acquisition.
The shareholder vote to decide the outcome is scheduled for May 19.
According to TWO, UWM’s proposed bridge facility from Mizuho Bank is conditional upon due diligence rather than being a fully committed financing arrangement. The board also pointed to UWM’s balance sheet “erosion,” noting that the company has taken on new debt to fund an average annual capital drain of approximately $535 million since 2023, according to Fitch. Furthermore, TWO highlighted that UWM’s proposal presented a cash position of $402 million but failed to account for a $170 million dividend paid out in early April.
“Compounding these concerns, the Revised Proposal omits customary interim operating covenants, leaving UWMC unrestricted in its ability to issue equity and declare further capital-draining dividends prior to closing.”
TWO also raised concerns regarding UWM’s public statements, which the board argued undermine the “credibility” of the revised proposal. Specifically, the board questioned UWM characterizing the business as “effectively a melting ice cube,” despite having projected $150 million in annual synergies in its original December 2025 transaction proposal. Additionally, TWO noted that a cash proposal contradicts UWM’s stated primary goal of increasing its stock float.
“UWMC has further undermined its credibility by repeatedly accompanying its proposals with threats of litigation if its terms are not accepted – conduct inconsistent with a counterparty acting in good faith,” the board wrote.
Furthermore, TWO stated that UWM removed crucial employee protections that were included in its original merger agreement. This omission significantly raises the risk of personnel attrition, regulatory and GSE disapproval and other operational hurdles. If the transaction were to ultimately fail to close, TWO warned it could be left as an independent entity with a depleted workforce, severely diminishing its overall value.
While UWM’s proposal claimed the deal could close within two to three months of signing, TWO countered that state regulatory requirements for change-of-control approvals mandate at least 120 days of advance notice, making UWM’s timeline unrealistic.
Analyst evaluation
Evaluating the situation, Keefe, Bruyette & Woods analysts noted that “while TWO shares are likely to be weak, it’s not clear that this is the last word on the sale of TWO.”
