Capitol Acquisition Corp. of Washington said Thursday that it has agreed to sell itself to a newly organized real estate investment trust, Two Harbors Investment Corp., to form a company that would focus on residential mortgage-backed securities.

Stock issued through Capitol's 2007 initial public offering would be converted, on a one-for-one basis, into shares of the privately held Two Harbors. The REIT would be managed by Pine River Capital Management LP, which has $800 million of assets under management and focuses on distressed credit and arbitrage.

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