Sculptor rejects higher bid, still prefers Rithm’s deal

New York-based asset management firm Sculptor Capital Management said Wednesday it rejected an improved bid from a group of investors. Sculptor said it still prefers the deal with Rithm Capital due to the closing certainty.

“The Special Committee has not concluded that the Consortium’s most recent revised proposal constitutes a superior proposal or is reasonably expected to lead to a superior proposal (as defined in the Company’s merger agreement with Rithm Capital Corp.),” the company said in a statement. 

The consortium, which includes investors Boaz Weinstein, Bill Ackman, Marc Lasry and Jeff Yass, priced Sculptor at $12.76 per Class A share, an increase of 51 cents from its first proposal. 

The bid is higher than the $11.15 per share offered by Rithm Capital. However, Sculptor’s special committee of independent members said they could not support a transaction with “significantly less certainty of closing.” 

Sculptor, led by CEO Jimmy Levin, alleges in its statement that the consortium proposal requires its stockholders to take the risk of fund investors not approving changes in the company’s leadership. 

Regarding its financials, the proposal includes insufficient equity commitments to fund the transaction. Ultimately, it requires debt financing that is “substantially more conditional and creates greater risk to closing” compared to the Rithm’s proposal, the company said. 

In addition, if the group breaches and refuses to consummate the deal, its financial exposure in damages action is capped at $39.2 million. 

Meanwhile, Rithm is exposed to full damage. The real estate investment trust that operates NewRezCaliber and several other businesses announced a deal to acquire Sculptor for $639 million in July. If regulators approve, it will bring Sculptor’s $34 billion in assets under management to Rithm. The deal is expected to close in the fourth quarter of 2023. 

The Sculptor and Rithm’s transaction is a key issue in a dispute between Daniel Och, the company’s founder, and Levin. Och and other shareholders demanded that Sculptor release books and records on Aug. 22.  

In a letter to the group of founders and shareholders, Sculptor said their request was “improper” and motivated by Och’s “long-standing resentment” of being exited from the company.