Sculptor shareholders need info on rejected higher bid, Och says

Daniel Och, the founder of Sculptor Capital taking on company management over the sale to Rithm Capital, demanded the former provide more information regarding a $1.61 per share higher bid.

The offer from a group identified in a Securities and Exchange Commission filing as "Bidder J," valued Sculptor at $12.76 per share.

A special committee of Sculptor's board rejected the offer, declaring the "proposal continues to lack certainty of closing and presents significantly higher execution risk for Sculptor's stockholders than the Rithm transaction," the SEC filing noted.

The agreement with Rithm calls for compensation of $11.15 per share.

"It has been widely reported that the [Bidder J] consortium includes Boaz Weinstein, Marc Lasry, Bill Ackman and Jeff Yass, some of the most acclaimed investors of the last 25 years," a statement from Och and others identified as "founding partners" read. "It seems evident that such a group could augment Sculptor's investment team while paying much more cash to the shareholders."

Och repeated his call for Sculptor to suspend the non-disclosure agreements "to maximize the bidding process and achieve the highest value for shareholders."

The Bidder J group would reportedly push out current Sculptor CEO Jimmy Levin, with whom Och has some antipathy. If the Rithm deal goes through, Levin stays in the position.

"The Consortium's proposal requires Sculptor's stockholders to take the risk that Sculptor's fund investors will not approve of Bidder J's CEO and other outsiders having dominion over their capital," the SEC filing explained. "The idea that sophisticated institutional investors undertaking extensive due diligence will simply consent to a change of control which results in new personnel or a new 'Office of the CIO' managing their money (even where this 'Office' includes certain members of the existing investment team) is aspirational at best."

Sculptor's argument that more certainty of consummation exists with Rithm rather than Bidder J is a valid one, added Eric Hagen, an analyst with BTIG, in a report.

"As rich as the investor coalition is, there are a variety of reasons why a single counterparty in a complicated M&A transaction may be superior to facing multiple individual counterparties with limited recourse if the deal breaks up," Hagen said.

However, Hagen also reiterated his view that Rithm is likely to have to raise its offer in order to get Sculptor's shareholder approval.

While some investors might agree with Och's aim of replacing the management team, "we think it could still be difficult for some stockholders to digest the idea of potential money left on the table without getting at least a little more from Rithm," he wrote.

As for releasing the NDAs, Hagen said it is unclear how long Sculptor can keep the Och group at bay in keeping them private. But their release would also serve to intensify the likely proxy fight "because it gives the bidders a soap box to help drum support, which could cloud visibility from Rithm's vantage point," he continued.

"We still like Rithm irrespective of the Sculptor deal closing, although we think the optionality for shareholders could strengthen meaningfully if it can execute on its vision of becoming a scaled asset manager," Hagen said.

While not specifically tied to the completion of this deal, a spinout of Rithm's mortgage banking business is more likely if this combination occurred. Rithm has a confidential S-1 for an initial public offering filed with the SEC.

Sculptor opened at $11.61 on Sept. 1, $1.15 per share under the Bidder J offer although 46 cents higher than what Rithm agreed to pay.