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.
Brian Taylor, founder and chief executive of Pine River, would be Two Harbors' chairman under the deal, which is expected to close by Sept 30. Mark Ein, the chairman and CEO of Capitol Acquisition, would become Two Harbors' vice chairman.
"We believe Two Harbors represents a compelling opportunity for investors to capitalize on historically unprecedented values in the $11 trillion U.S. mortgage market," Ein said in a press release. As a special-purpose acquisition company, Capitol went public to raise funds for the purpose of acquiring other firms, without a specific industry in mind. These "blank check" companies were a hot investment idea several years ago. Capitol issued a "going concern" warning last month.
The Two Harbors investment team would be led by co-chief investment officers Steve Kuhn and Bill Roth. Kuhn joined Pine River from Goldman Sachs Group Inc. in January. Roth is to join the company June 16, after working at Citigroup Inc. since 1981.
