Rithm Capital (RITM), an asset manager focused on the real estate and financial services industries and Sculptor Capital Management Inc. (SCU), a global alternative asset manager with $34 billion in assets under management (AUM), recently announced entry into a definitive agreement under which Rithm will acquire Sculptor in a transaction valued at approximately $639 million, which includes $11.15 per Class A share of Sculptor.
Sculptor’s investment and leadership teams will continue in their roles, and certain members of Sculptor leadership have agreed to vote shares held by them, representing an aggregate of approximately 26% of the outstanding Sculptor voting shares, in favor of the transaction. And upon completion of the transaction, Sculptor will operate as a subsidiary of Rithm and will continue to be led by Jimmy Levin as CIO and Executive Managing Partner, reporting to Michael Nierenberg, Chief Executive Officer, President, and Chairman of Rithm. Sculptor will continue to operate as is – with an intense focus on delivering risk-adjusted returns on its entrusted capital.
Strategic Rationale
1.) Significantly expands Rithm’s capabilities in the alternative asset management sector:
a.) $34 billion of AUM diversified across the real estate, credit, and multi-strategy investing spectrum
b.) Creates instant scale and broadens Rithm’s product offerings and investment management capabilities
2.) Combination of complementary platforms creates a compelling partner for investors:
a.) Rithm and Sculptor benefit from complementary capabilities, significantly enhancing the transaction potential and benefit to shareholders, fund investors, and employees
b.) Adds a long-tenured management and investment team to the Rithm platform with a strong track record
3.) Potential to unlock significant opportunities to grow Sculptor:
a.) Provides capital to accelerate growth across sectors
b.) Ability to augment existing Sculptor business by seeding new funds and strategies and leveraging existing infrastructure to launch complementary funds
4.) Attractive transaction for Rithm and Sculptor shareholders:
a.) Represents a premium of 18% over the closing price of Sculptor’s Class A shares on July 21, 2023, and a premium of 31% over the unaffected November 17, 2022 closing Class A share price of $8.50.
b.) Expected to be neutral to Rithm’s 2024 earnings and accretive in 2025
Key Transaction Details
Rithm is going to acquire Sculptor in a transaction valued at approximately $639 million. Sculptor Class A shareholders will receive cash consideration equal to $11.15 per share, with Sculptor operating partnership unitholders receiving the applicable amount of cash consideration in accordance with the Sculptor partnership agreements based on such $11.15 per share price.
The deal is expected to be funded from Rithm’s cash on hand and available liquidity and is expected to be accretive to Rithm shareholders in 2025.
The Sculptor Board of Directors, acting on the unanimous recommendation of the Special Committee, has unanimously approved the transaction and has recommended that Sculptor shareholders vote to approve it as well. And Rithm’s Board of Directors has also unanimously approved the transaction. The deal is subject to customary closing conditions, including approvals by Sculptor’s shareholders.
The deal is expected to close in the fourth quarter of 2023.
KEY QUOTES:
“This transaction is transformational for Rithm. Sculptor’s $34 billion of AUM coupled with Rithm’s $7bn of permanent equity capital and $30+ billion balance sheet creates a world-class asset management business. We are very excited to bring together two organizations with strong track records, excellent management teams, and seasoned investment professionals. Sculptor has a tremendous global investment platform, and we believe the combination of both our businesses will continue to deliver great long-term value for shareholders and fund investors alike.”
— Michael Nierenberg, Chairman, Chief Executive Officer and President of Rithm Capital
“We are extremely pleased about the opportunity to combine with Rithm to capitalize on the growing opportunity set we see in our business. We are excited to leverage this combination to continue to execute on our mission of providing our fund investors with attractive investment returns. 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.”
— Jimmy Levin, Chief Investment Officer and Chief Executive Officer of Sculptor
“We are thrilled to deliver a great outcome for Sculptor shareholders and an opportunity for Sculptor to continue to build on its exceptional platform. We look forward to watching the combined company grow its already strong position as a leader in the alternative asset management space.”
— Marcy Engel, Chairperson of Sculptor’s Board of Directors
