Sculptor Board Sued for Favouritism in Rithm’s $639 Million Buyout Bid
Sculptor Capital Management Inc.’s board of directors is facing a lawsuit for allegedly favouring a $639 million buyout bid from Rithm Acquisition Corp. over a higher offer from a rival bidder.
The lawsuit, filed in Delaware Chancery Court on Tuesday, claims that the board of the New York-based hedge fund manager breached its fiduciary duties by recommending the Rithm deal to shareholders. The suit seeks to block the transaction and to recover damages for shareholders.
The complaint alleges that the board of Sculptor Capital, which is led by Chief Executive Officer Michael Sacks, failed to properly evaluate the Rithm offer and instead favored it over a higher bid from an unnamed rival.
The lawsuit claims that the board “acted in bad faith” and “breached its fiduciary duties” by recommending the Rithm deal to shareholders. The suit also alleges that the board failed to properly evaluate the Rithm offer and instead favored it over a higher bid from an unnamed rival.
Rithm’s Offer
Rithm Acquisition Corp. is a special purpose acquisition company (SPAC) that was formed in April 2021. The company is backed by a group of investors, including Blackstone Group Inc. and Goldman Sachs Group Inc.
Rithm offered to buy Sculptor Capital for $639 million in cash and stock. The deal was announced in August 2021 and is expected to close in the fourth quarter of 2021.
Under the terms of the deal, Sculptor shareholders will receive $18.50 in cash and 0.038 shares of Rithm common stock for each share of Sculptor common stock they own. The deal values Sculptor at $19.50 per share, a premium of about 20% over its closing price on August 6, 2021.
Rival Bidder
The lawsuit claims that the board of Sculptor Capital failed to properly evaluate a higher offer from an unnamed rival bidder. The complaint alleges that the board “acted in bad faith” and “breached its fiduciary duties” by recommending the Rithm deal to shareholders.
The rival bidder offered to buy Sculptor for $20 per share in cash, a premium of about 28% over its closing price on August 6, 2021. The rival bidder also offered to pay a $25 million termination fee if the deal was not completed.
The lawsuit claims that the board of Sculptor Capital failed to properly evaluate the rival bidder’s offer and instead favored the Rithm deal. The complaint alleges that the board “acted in bad faith” and “breached its fiduciary duties” by recommending the Rithm deal to shareholders.
Shareholder Reaction
The lawsuit was filed by a shareholder of Sculptor Capital, who is seeking to block the Rithm deal and to recover damages for shareholders. The complaint alleges that the board of Sculptor Capital failed to properly evaluate the Rithm offer and instead favored it over a higher bid from an unnamed rival.
The lawsuit has been met with mixed reactions from shareholders. Some have expressed support for the lawsuit, arguing that the board of Sculptor Capital should have evaluated the higher offer from the rival bidder. Others have argued that the board acted in the best interests of shareholders by recommending the Rithm deal.
Analysis
The lawsuit against Sculptor Capital’s board of directors highlights the importance of proper evaluation of takeover offers. It is essential for boards of directors to evaluate all offers carefully and to make decisions that are in the best interests of shareholders.
In this case, the board of Sculptor Capital appears to have favored the Rithm deal over a higher offer from a rival bidder. The lawsuit claims that the board “acted in bad faith” and “breached its fiduciary duties” by recommending the Rithm deal to shareholders.
The outcome of the lawsuit will be closely watched by shareholders and corporate governance experts. If the lawsuit is successful, it could set a precedent for boards of directors to properly evaluate takeover offers and to make decisions that are in the best interests of shareholders.
Implications
The lawsuit against Sculptor Capital’s board of directors has implications for corporate governance. It highlights the importance of proper evaluation of takeover offers and the need for boards of directors to make decisions that are in the best interests of shareholders.
The outcome of the lawsuit will be closely watched by shareholders and corporate governance experts. If the lawsuit is successful, it could set a precedent for boards of directors to properly evaluate takeover offers and to make decisions that are in the best interests of shareholders.
The lawsuit also raises questions about the role of special purpose acquisition companies (SPACs) in mergers and acquisitions. SPACs have become increasingly popular in recent years, but the Sculptor Capital lawsuit highlights the potential risks associated with these deals.
Outlook
The lawsuit against Sculptor Capital’s board of directors is a reminder of the importance of proper evaluation of takeover offers. It is essential for boards of directors to evaluate all offers carefully and to make decisions that are in the best interests of shareholders.
The outcome of the lawsuit will be closely watched by shareholders and corporate governance experts. If the lawsuit is successful, it could set a precedent for boards of directors to properly evaluate takeover offers and to make decisions that are in the best interests of shareholders.