Although Rithm Capital raised its bid for Sculptor Capital Management, it is still below a competing offer made by a group headed up by Boaz Weinstein.
The hostile bid was supported by Daniel Och, Sculptor's co-founder, who had a falling out with company management.
Even so, given fund investor support, it is unlike shareholders reject Rithm. But if the deal were not to go through, that would not really affect Keefe, Bruyette & Wood's views on the real estate investment trust.
Rithm will now pay $12 per share for a valuation of approximately $676 million, up from the originally agreed to $11.15; but a Securities and Exchange Commission filing put a prospective offer from the Weinstein group at around $13 per share.
A message was left for Weinstein via his firm, Saba Capital Management but was not returned by press time.
By acquiring Sculptor, Rithm would be increasing its alternative asset manager business. That would be the catalyst for spinning out the mortgage banking segment. Rithm has a confidential registration statement for an initial public offering on file at the Securities and Exchange Commission.
KBW is "constructive on the deal" and what it means for Rithm because of the alternative asset management aspects.
"However, this is a relatively small transaction for Rithm ($676 million represents roughly 8% of Rithm's total capital as of 2Q)," a KBW report from Bose George noted. "So, we would not see it as material to our outlook for the company if the deal did not go through."
The analysts at Wedbush Securities, however, thought completing the deal has more meaning for Rithm's future.
"If this deal is able to get across the finish line, we believe that Sculptor can help to accelerate Rithm's ongoing expansion into the alternative asset management space and generate increased scale," said Jay McCanless in a report. "As the company continues to evolve, which could also include a spin-off of the mortgage company, we believe that shares could be set for a re-rating, and trade more in-line with other alternative asset manager peers."
If anything, this skirmish did not hold Rithm back from expanding its mortgage servicing operations, agreeing to acquire Computershare Mortgage Services and its subsidiary Specialized Loan Servicing for $720 million.
Over 85% of Sculptor's fund investors are at this time in favor of the Rithm transaction.
"We are grateful for the support we have received from Sculptor's clients, whose backing is an important testament to the long-term potential of this combination, and look forward to closing this transformational transaction," Michael Nierenberg, chairman, CEO and president of Rithm, said in a press release.
A special meeting of Sculptor shareholders to approve this deal will be held on Nov. 16. If approved, this transaction will close later in the fourth quarter.
