Ready Capital Corporation (NYSE:RC) has announced a definitive merger agreement with United Development Funding IV (UDF IV), a real estate investment trust. The acquisition is expected to boost Ready Capital's core business and expand its portfolio, with UDF IV shareholders potentially receiving up to $5.89 per UDF share through a combination of pre-closing distributions, shares issued at closing, and contingent value rights.
Upon completion of the transaction, Ready Capital is anticipated to have a pro forma equity capital base in excess of $2.2 billion. As part of the merger consideration, each share of UDF IV common stock will be converted into 0.416 shares of Ready Capital common stock, with UDF IV shareholders expected to own approximately 7% of Ready Capital's outstanding shares at closing.
The transaction is expected to be financially compelling for Ready Capital, generating meaningful distributable earnings accretion in 2025 and 2026, with minimal book value dilution at closing and projected returns exceeding the cost of equity capital. Additionally, Ready Capital is acquiring a portfolio of pure-play residential land loans concentrated in the Dallas-Fort Worth market, positioning it to benefit from significant unmet housing supply.
For UDF IV shareholders, the merger is expected to facilitate significant upfront cash distributions, provide ownership of a NYSE-listed stock with a current dividend yield of 13.6%, and offer the potential for contingent consideration through contingent value rights.
The combined company will continue to operate under the name Ready Capital, with its shares expected to trade on the NYSE under the existing ticker symbol "RC," and will be managed by Waterfall Asset Management, LLC.
The transaction is subject to the approval of UDF IV shareholders and other customary closing conditions, with the expected closing in the first half of 2025. Piper Sandler & Co. is serving as the exclusive financial advisor to Ready Capital, while Alston & Bird LLP is serving as its legal advisor. Moelis & Company LLC is serving as the exclusive financial advisor to UDF IV, with legal advisors from Gibson, Dunn & Crutcher LLP and Holland & Knight LLP.
UDF IV shareholders are encouraged to review the relevant documents filed by Ready Capital and UDF IV with the Securities and Exchange Commission for further details about the proposed merger and related matters. This acquisition marks a significant milestone for both Ready Capital and UDF IV, offering potential benefits and growth opportunities for both entities and their stakeholders. The market has reacted to these announcements by moving the company's shares 0.2% to a price of $7.39. For more information, read the company's full 8-K submission here.
