Hedge Fund Sculptor Rejects Offer From Weinstein

Sculptor Capital Management received multiple takeover bids that were higher than the $639 million offer it ultimately accepted from Rithm Capital Corp. last month, the latest twist in a deal that’s divided Wall Street.

(Bloomberg) — Sculptor Capital Management received multiple takeover bids that were higher than the $639 million offer it ultimately accepted from Rithm Capital Corp. last month, the latest twist in a deal that’s divided Wall Street.

Some of those offers valued Sculptor at more than $700 million, according to a proxy statement Sculptor filed Monday. The disclosure comes after reports that hedge fund giants Boaz Weinstein, Marc Lasry and Bill Ackman bid more than $12 a share, topping Rithm’s $11.15 per-share offer. 

Of the higher-value bids, some were withdrawn, or were rejected by Sculptor because of burdensome conditions and because the suitor hadn’t secured financing, the company said in the proxy statement. In one case, the firm’s co-founder Dan Och and other founding partners rejected a higher bid.

The report adds more intrigue to a long-running feud between the firm’s management and founding partners including Och, who had contested Chief Executive Officer Jimmy Levin’s pay packages.

Last week, Och and the founding partners slammed the deal with Rithm and said it “substantially” undervalued Sculptor. In the proxy statement filed Monday, Sculptor revealed it was in contact with 70 interested suitors after the firm’s November announcement that it was looking for a buyer. They included private and publicly-traded alternative asset managers, financial services companies, a fintech company and others. 

Bidder D

On Jan. 27, one bidder identified as “Bidder D” offered between $11.75 and $12.50 a share, the latter making it the highest price per share of Class A Common stock the firm had been offered, the statement said. On Feb. 15, Bidder D revised the offer to $12 but insisted that it wouldn’t go through with the deal without the support of Och and the other founding partners.

Compared to the offer from Bidder D, which had the cash to fund the deal, Rithm’s offered price per share was “an inferior price,” according to Sculptor’s calculations. 

“Bidder D submitted the highest offer price with the fewest conditions to closing and indicated a willingness to pursue a short timeline to execution,” the proxy said. 

In March, Och and the other founding partners refused to support the “Bidder D” deal, contending that it undervalued Sculptor and that its “compensation structure was the primary cause of what it viewed as insufficient valuation in the proposal,” according to the proxy statement. 

Another bidder proposed $12.25 a share, but didn’t produce evidence of having the debt or equity financing necessary to execute it and wanted to sell portions of the hedge fund’s collateralized debt obligation business, according to Sculptor.

The filing comes after the Wall Street Journal reported Sunday on the rejected bid from Weinstein, Lasry and Ackman.

“This bidder has not demonstrated adequate committed funding for any of its bids,” the publicly traded hedge fund said in a statement, without identifying the bidders. 

Sculptor didn’t identify the names of the bidding group in its statement, and said it “only includes committed financing for less than half of the amount required to consummate the transaction and underestimates the amount that would be necessary by several hundred million dollars.” 

Och co-founded the firm formerly known as Och-Ziff before stepping down as chief executive officer in 2018.

Ackman declined to comment. Lasry, Weinstein and Och didn’t reply to requests for comment. 

Sculptor’s past few years have been tumultuous. The firm went public in 2007 and was one of the world’s largest hedge funds by 2016, with assets approaching $50 billion, when it was buffeted by scandal. That year, a unit pleaded guilty to a conspiracy charge as a part of a settlement of a long-running US probe into bribes paid to gain lucrative business in Africa.

Assets under management have since declined to around $34 billion. Sculptor’s shares are down about 41% in the past five years.

Credit trading veteran Weinstein, who was thrust into prominence a decade ago after betting against the JPMorgan Chase & Co. trader known as the London Whale, runs Saba Capital Management. Ackman leads Pershing Square Capital Management, while Lasry is the co-founder of Avenue Capital Management.

Weinstein and Ackman have previously publicly supported each other on common trades. Last year, Weinstein said he bet against the Hong Kong dollar, joining Ackman in publicizing his short position on the pegged currency and called the trade “a smart lottery ticket.”

Read More: Boaz Weinstein Sees 200-to-1 Payoff Potential in HK Dollar Short

–With assistance from Tom Metcalf.

(Adds details from proxy statement. A previous version corrected to remove a number of bids)

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