Sculptor Capital Management was once the largest hedge fund in the world. It has now agreed to be bought for $639mn, ending a bitter battle between its billionaire founding Daniel Och, and his former protégé Jimmy Levin.
Rithm Capital, a New York-based firm that specializes in real estate investment, will pay Sculptor class A shareholders $11.15 each. This is an 18% premium over the closing price of the fund on Friday. Wall Street traded Sculptor stock at a 16.5 percent increase on Monday.
The sale price is a fraction the valuation of $12bn that Och-Ziff Capital Management – as Sculptor at the time was known – listed its shares in 2007. Since then, the firm’s share price has fallen by more than 90%.
Last year, Sculptor became involved in a legal dispute over Levin’s lucrative remuneration contract with Och. Och handed over the reins of the firm to Sculptor in 2018. The founder of the firm questioned the board’s decision to pay Levin more than $145mn for 2021, despite a “period of less than mediocre performances”.
Och’s lawsuit claimed that the payout was unfair to public stockholders, including himself. Och’s nominee to the Sculptor Board resigned in protest last year.
The legal battle has brought to light a long-simmering conflict between Och, and Levin. They first met in 2006 when Levin taught Och’s child how to waterski. Levin began his career at the firm as an analyst in 2006. He quickly rose through the ranks and became chief investment officer with a pay package of $280mn in 2017. This set him apart amongst many of his peers.
The relationship seemed to be deteriorating and Och chose former Credit Suisse executive Robert Shafir as his successor. Och is still a major shareholder in Sculptor and a private fund investor.
Sculptor settled with Och late last year, when the hedge fund that manages assets worth $34bn launched a sales process using a board committee special, including Och. This board committee unanimously decided to sell Sculptor on Monday.
Companies said Monday that the fund will be managed as an independent subsidiary by Rithm Capital and its investment staff will remain in place. Levin will lead Sculptor’s investment operations, reporting to Rithm’s chief executive Michael Nerenberg.
If Rithm had not decided that Levin would continue to serve in his current position, he could have made more than $40mn if he sold the shares on Monday. According to filings, Levin holds voting rights over 14 million Sculptor shares valued at $150 million.
The New York-based company, which was then called Och-Ziff had many controversies under Och’s leadership. Most notably, in 2016, it paid $413mn US authorities to settle charges of bribery. It was accused of paying for bribes to gain business in at least five African nations, including Muammer Gaddafi’s regime in Libya and Democratic Republic of Congo. In 2019, it changed its name to Sculptor.
Sculptor refused to comment.
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