Dan Och is demanding that Sculptor Capital Management release books and records to investigate how the hedge fund firm he founded chose Rithm Capital Corp. as its merger partner.
(Bloomberg) — Dan Och is demanding that Sculptor Capital Management release books and records to investigate how the hedge fund firm he founded chose Rithm Capital Corp. as its merger partner.
A Sculptor proxy statement this week “appears to present a narrative that is misleading and incomplete,” Och and four other former executives said Tuesday in a filing. It shows that a special committee of the firm “remains beholden to management and is failing to act in the best interests of shareholders.”
Read More: Hedge Fund Sculptor Received Other Bids at Higher Valuations
It’s the latest salvo in a feud between Sculptor Chief Executive Officer Jimmy Levin and Och, who remains one of the firm’s biggest shareholders. He and the other founding partners have opposed Levin’s pay packages and recently said Sculptor’s senior management may have tried to influence potential buyers to agree to a deal that would benefit the current executives while harming shareholders. Sculptor, meanwhile, argued that Och’s group blocked an offer that was more attractive than Rithm’s.
The special committee rejected “multiple bids with a higher potential stock price because they did not provide sufficient assurances that management would be both retained and compensated at stratospheric levels,” Och’s group said in Tuesday’s filing.
Read More: Susquehanna’s Yass Joined Weinstein, Ackman in Bid for Sculptor
The demand for records would help Och’s team investigate “potential breaches of fiduciary duty and other wrongdoing” related to the approval of the deal, its fairness, the independence of the special committee and accuracy of the company’s public disclosures, according to the filing. The group is seeking board meeting minutes, recordings and presentations, among other things.
Rithm initially agreed to an offer of $12 a share but reduced that bid because it would need to spend more than it anticipated for the senior leadership’s incentive and retention plan, according to Tuesday’s filing. Och’s group alleged that the special committee is seeking to exclude it from a vote to approve the deal.
Shares of Sculptor fell 0.7% Tuesday to close at $11.73. The stock has lost more than half of its value in the past two years.
The group also criticized the compensation package Levin and current management would receive under the merger agreement. It provides immediate liquidity “equating to a payday of tens of millions of dollars,” and Levin’s “walk-away” right would allow him to cash out unvested compensation regardless of his performance, according to the filing.
“Because the merger provides Mr. Levin both a guaranteed floor and only upside from there, Mr. Levin’s interests in seeing the merger approved are entirely misaligned from the interests of public stockholders in securing the best transaction reasonably available,” Och’s group said.
They also requested that Sculptor allow Bidder H and Bidder K — whose names were anonymized in the proxy — to make public statements about their offers, “and allow them to work with us on improving their bids.” They also asked Sculptor to publicly state that it will consider all offers equally regardless of any bidder’s plan for senior management.
Investors Boaz Weinstein, Marc Lasry, Bill Ackman and Jeff Yass offered more than $12 a share, topping Rithm’s bid of $11.15. That group would likely seek to replace Sculptor’s management team, the Wall Street Journal previously reported.
(Updates with additional commentary from filing starting in fifth paragraph.)
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