UWM Walked Away From the Two Harbors Bidding War. That Might Be the Best News for Shareholders.
Key Points
Even a good company can be a bad investment if you pay too much for the stock.
The same sentiment is true for companies when they make acquisitions.
United Wholesale Mortgage (NYSE: UWMC), which usually just goes by the acronym UWM, just got beaten. But in this case, being a loser could be the best thing that happened to the company and its shareholders. Here's what happened and why the failed bid to buy Two Harbors (NYSE: TWO) isn't really that bad of an outcome.
Bidding wars can lead to trouble
UWM and privately held CrossCountry Mortgage were both attempting to buy the mortgage real estate investment trust (REIT) Two Harbors. It all started with UWM and Two Harbors agreeing to a $1.3 billion all-stock deal in late 2025. CrossCountry Mortgage stepped in at the end of the first quarter of 2026, offering an all-cash deal that Two Harbors deemed superior.
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Image source: Getty Images.
As often happens in such situations, there was an ugly, public back-and-forth. At the end of the day, CrossCountry Mortgage's cash offer rose from an original $10.70 per share to $12, or roughly $1.3 billion. That comes even after UWM offered $12.50 in cash for Two Harbor shareholders who preferred cash over 2.3328 shares of UWM. While UWM was clearly displeased with losing out, it also didn't pursue it further after its final offer.
If you own UWM, you should probably be pleased with the outcome. As anyone who's ever been in a bidding war knows, the winner often ends up overpaying. And, as Benjamin Graham, the famous investor who helped train Warren Buffett, often noted, paying too much for a good company can turn it into a bad investment. Corporate acquisitions are no different.
Sometimes the winner is the loser
Buffett, however, is a rather interesting name here. He backed Occidental Petroleum's (NYSE: OXY) winning bid for Anadarko Petroleum, helping the energy company outbid industry giant Chevron (NYSE: CVX). Only the deal left OXY with a huge amount of debt, just as the energy industry started a downturn. OXY had to cut its dividend to free up cash for deleveraging, and the stock price crumbled.
It isn't clear what will happen with CrossCountry Mortgage and Two Harbors, since CrossCountry Mortgage is private. However, UWM showed discipline by not pursuing Two Harbors to the point of putting its own business at risk. The importance of this outcome increases when you note that UWM's dividend yield is a shockingly high 20% and its earnings don't currently cover the dividend payment. In fairness, loan origination volume in the first quarter of 2026 rose 39% year over year, making it "the second-highest first quarter production in company history." Still, it is probably better for the company to avoid the cost and complexity of a contentious merger, given its massive dividend yield, which suggests investors are already worried about the risk of a dividend cut.
Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.