Sculptor Capital: grey areas cause grey hairs in messy bidding war

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

A Delaware corporate law judge once half joked that being a public company director was the easiest job in the world. He referred to the myriad legal protections afforded board members.

Board members overseeing the listed hedge fund Sculptor Capital Management might object. Sculptor announced on Thursday that it had extracted a higher price from Rithm Capital. The asset manager had previously signed a deal to buy Sculptor in July.

The bumped-up price, from $11.15 to $12 per Sculptor share and $676mn valuation in aggregate, reflects a typical deal.

But this follows a messy tussle between the company and its co-founder Dan Och, who has not favoured the transaction. A rival bid lurks for as much as $13 per share from a group led by hedge funder Boaz Weinstein.

Filings show that directors have rejected the Weinstein offer over worries about his financing and ability to close. Such abstractions can give directors grey hairs.

Adding to the jumble of views, Sculptor directors’ calculus must weigh more than those of common shareholders. There is the impact of private Sculptor partnership units held by insiders that have tricky tax arrangements. 

According to securities filings, Sculptor prefers the Rithm bid because it has faith in its financing. Moreover, the company has said that the rival group has proposed excessive wriggle room to walk away from a deal, should Sculptor’s business suddenly decline before closing.

The board could not tolerate this risk even after the Weinstein group has made eight different offers to appease Sculptor’s directors.

Shareholders will weigh in with their views by voting on the Rithm terms. The company now seeks a simple majority approval, rather than the previous standard of a majority of only non-insiders.

Och has not been shy about taking his grievances with Sculptor directors to court. Founder-led partnerships are ill suited for public market governance, a lesson Sculptor directors may struggle with long after any deal closing.