Rithm deal 'substantially undervalues' Sculptor, Dan Och says

Dan Och said the deal for Rithm Capital Corp. to buy Sculptor Capital Management "substantially undervalues" the hedge fund firm and "penalizes" all shareholders.

Senior management may have sought to influence potential buyers into an "outcome in their favor and to the potential detriment of the company's shareholders," Och and four founding partners wrote in a letter Wednesday to the firm's special committee. 

The committee didn't seriously entertain potential suitors whose offers focused more on shareholder value than management interests, they wrote in the letter, which was attached to a regulatory filing. Some bidders may have been excluded from the process, while others want to make a higher-value offer now but are barred from doing so by nondisclosure agreements, it said.

Photographer: Rick Maiman/Bloomberg

Och, who founded the firm formerly known as Och-Ziff, asked the committee to release all bidders from any restrictions.

Rithm agreed last month to buy Sculptor in a deal valued at about $639 million, which is expected to be completed in the fourth quarter. The company had been embroiled in litigation with Och over pay packages given to Sculptor Chief Executive Officer Jimmy Levin. The two resolved the legal dispute last year, and Sculptor formed a special committee to explore potential transactions.

The Och group previously expressed its concerns with the bidding process, according to the letter, which was also signed by Harold Kelly, Richard Lyon, James O'Connor and Zoltan Varga.

Under the terms of the deal, Sculptor's Class A shareholders will receive $11.15 per share in cash, or they can choose to roll over their Sculptor stakes into partnership units in one or more Rithm subsidiaries.

Shares of Sculptor rose 0.9% to close at $11.03, extending their gain this year to 27%. The stock is still down about 60% over the past two years.

Rithm shares fell 1% to close at $9.74.

Sculptor and Rithm didn't immediately reply to requests for comment.

"We have long sought a partner with the stable capital structure, culture and vision to help unlock the potential for our platform to deliver more and greater value to our fund investors," Levin had said in a statement after the deal was announced.

The group of former Sculptor executives said they have been pushing Rithm for better terms, both before and after the transaction was announced, and that if there are no material changes "we will vigorously oppose this transaction."