Sculptor accuses founding father of performing on resentment amid scrutiny of Rithm’s deal 

In a letter to a gaggle of founders and shareholders, New York-based asset administration agency Sculptor Capital Administration mentioned their request to examine the corporate’s books and information pertaining to its acquisition by Rithm Capital was “improper” and motivated by founder Daniel Och’s “long-standing resentment” of being exited from the corporate. 

Sculptor additionally mentioned within the letter despatched on Tuesday that Och and the opposite shareholders have requested hundreds of thousands of {dollars} in money for authorized bills incurred in the course of the technique of being acquired by Rithm Capital. Och and shareholders additionally requested a prepayment associated to a tax settlement tied to the corporate’s IPO in 2007. 

Och, shareholders and Rithm Capital didn’t reply to requests for remark.

The letter from Sculptor is the most recent chapter of a dispute between the asset administration agency, Och and different shareholders since Rithm — the actual property funding belief that operates NewRez, Caliber and a number of other different companies —introduced a deal to accumulate Sculptor for $639 million in July. If regulators approve, it should deliver Sculptor’s $34 billion in property below administration to Rithm. 

“Whereas ostensibly requesting details about the gross sales course of described within the Firm’s preliminary proxy assertion, your Demand for books and information is ready in opposition to historic context that makes clear that objective is pretextual, and that the true objective is the continuation of what the corporate views as Mr. Och’s well-publicized, years’ lengthy smear marketing campaign in opposition to the Firm’s administration,” the letter states. 

Och, who based Sculptor in 1994, stepped down as CEO in 2018. In 2016, an Africa-based subsidiary entered into an settlement with the Division of Justice (DOJ) to pay a felony penalty of greater than $213 million in reference to a bribery scheme involving officers within the Democratic Republic of Congo and Libya. 

Och, who continues to be an lively shareholder, and different former executives sued the firm in 2022 over CEO Jimmy Levin’s $145.8 million compensation.

Och, who was beforehand a mentor to Levin, now finds himself on the alternative aspect of a dispute with Levin wherein the Rithm deal is a key challenge.

On August 16, a gaggle of shareholders, together with Och, Harold Kelly, Richard Lyon, James O’Conner and Zoltan Varga, sent a letter to Sculptor’s ​​particular committee of the board of administrators saying the take care of Rithm “considerably undervalues the corporate.” 

They famous that on December 17, 2021, when “the Board of Administrators authorised the exorbitant compensation bundle” for Levin, the inventory was buying and selling at $20.02. 

“Simply over 18 months later, the Board now has authorised a deal that will pay the general public shareholders $11.15 per share, only a fraction of what the inventory was as soon as price.” 

Within the letter, Och and the opposite shareholders mentioned they have been working with Rithm to see whether or not deal phrases may very well be improved. Absent “materials modifications,” the group will “vigorously oppose this transaction,” they wrote.   

On August 21, Sculptor replied in a proxy statement that it obtained a number of takeover bids greater than the Rithm provide, some valuing the corporate at greater than $700 million. Sculptor didn’t settle for these bids resulting from burdensome circumstances, lack of secured financing, or, based on the corporate, as a result of Och and other founding partners rejected its phrases. 

Och and different shareholders, in subsequent correspondence, demanded that Sculptor release books and records on August 22.  

“The suggestion that there have been different credible bids that supplied larger worth and certainty of closing, with or with out present administration, is distorted — no such bid exists,” Sculptor mentioned in response to the request. “Nor does Rithm’s bid crystallize supposed losses from the adoption of Mr. Levin’s compensation bundle. Mr. Levin has additionally agreed to substantial reductions in his compensation to assist a Rithm transaction.”

Sculptor mentioned in its letter that Och and the opposite shareholders requested Rithm to comply with advance tens of hundreds of thousands of {dollars} as a prepayment on the favorable low cost price of the corporate’s Tax Receivable Settlement. 

Och and shareholders additionally demanded Rithm pay a further $5.5 million in money for the group’s authorized bills supposedly incurred in reference to the corporate’s gross sales course of. 

“The transaction below dialogue between the Och Group and Rithm would have included the choice for a rollover to be able to let you keep away from recognizing vital taxable achieve obtained within the transaction. Notably lacking from these discussions have been significant concessions by any of you for the good thing about public stockholders,” Sculptor states in its letter.