Two Harbors hit with shareholder lawsuit over CCM acquisition

Shareholder Michael Koblentz filed another lawsuit against Two Harbors Investment Corp. and its board of directors, alleging violations of the Securities Exchange Act tied to the company’s pending acquisition by CrossCountry Intermediate Holdco (CCM).

Koblentz previously filed a similar suit targeting Two Harbors’ original merger agreement with UWM Holdings Corp. (UWMC), which was closed after it lost a bidding war to CCM.

Filed April 17 in an Illinois federal court, the new complaint claims Two Harbors submitted “materially incomplete and misleading” financial disclosures. It also alleges the board agreed to unfair deal protections and that executives timed stock trades to personally benefit from the mergers and acquisitions activity.

The lawsuit names Two Harbors chairman Stephen Kasnet and president and CEO William Greenberg as defendants.

According to the complaint, the CCM agreement contains “preclusive deal protection devices” designed to block competing offers and make the transaction a “fait accompli.” As an example, the plaintiff points to $25.4 million that Two Harbors must pay CCM if the deal collapses — a fee explicitly designed to reimburse CCM for covering the breakup fee Two Harbors owed to UWM.

The plaintiff also raises questions about whether company executives may have traded shares around the UWMC deal’s announcement to “maximize their profits.”

“Regardless of whether the Company elected to pursue a transaction with UWMC or CrossCountry, the timing of the Rule 10b5-1 sales and whether such timing may have influenced Greenberg or the Board to pursue strategic alternatives to maximize their own individual profits or interests and avoid their respective options being devalued or less optimized is material,” the lawsuit states. 

CCM and Two Harbors declined to comment when reached by HousingWire.

UWM initially announced an all-equity agreement to acquire Two Harbors in December. But a declining UWM stock price tanked the deal’s value, allowing CCM to emerge as the winning bidder in late March with an all-cash offer of $10.80 per share.