American Capital Agency (AGNC) Buys Its External Manager

Per its previous announcement, American Capital Agency Corp. (NASDAQ:AGNC) , the mortgage real estate investment trust (“mREIT”) has completed the acquisition of its external manager American Capital Mortgage Management, LLC (“ACMM”) from American Capital Asset Management, LLC, a wholly-owned company of American Capital, Ltd. The acquisition of ACMM and its subsidiaries for a purchase price of $562 million, completes American Capital Agency’s internalization of management function.

ACMM’s subsidiary – American Capital MTGE Management, LLC – will continue providing investment management services to American Capital Mortgage Investment Corp. (NASDAQ:MTGE) externally.

The acquisition of its external manager is likely to create value for the shareholders of the American Capital Agency in the long run. The sizeable estimated cost savings generated through American Capital Agency’s internalization are anticipated to lower the run-rate operating costs, thereby raising shareholders’ value.

American Capital Agency focuses on leveraged investments in agency MBS. The company reported first-quarter 2016 net spread and dollar roll income of 52 cents per share (excluding estimated “catch-up” premium amortization benefit), missing the Zacks Consensus Estimate of 57 cents. The reported figure also came in lower than 54 cents earned in the prior quarter.

Presently, while American Capital Agency sports a Zacks Rank #1 (Strong Buy), American Capital Mortgage Investment carries a Zacks Rank #3 (Hold).

Investors interested in mREIT may consider Annaly Capital Management, Inc. (NYSE:NLY) and Capstead Mortgage Corp. (NYSE:CMO) . Both these stocks hold a Zacks Rank #2 (Buy).

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