Sculptor Capital Management Inc. settled a Delaware lawsuit seeking to block a $720 million buyout bid by Rithm Capital Corp. two days before a shareholder vote on the deal.
The pact comes as dual court hearings scheduled in New York and Delaware Tuesday threatened to derail the Nov. 16 shareholder vote that would green light the $12.70 per share deal. The settlement terms were not disclosed. The New York hearing is ongoing.
The Delaware lawsuit was brought by a Sculptor shareholder who accused the firm's management of interfering with a higher bid from hedge fund manager Boaz Weinstein. While the settlement withdraws the request for a court order blocking the Nov. 16 vote, a separate lawsuit in New York may still derail the vote.
The settlement bolsters Rithm's chances of winning Sculptor shareholder approval of its bid on Thursday, for which it appears to have their support. Weinstein has pursued Sculptor for months, most recently at $13.50 per share, but its management has repeatedly rejected his offers. A purchase of Sculpture would catapult Weinstein to the next level among hedge fund titans.
Sculptor shares traded at $12.71, one cent higher than Rithm's offer price, at 12:12 p.m. in New York.
The New York lawsuit was brought by a group of four former executives who say the Rithm deal would wipe out their $30 million in stock. Sheila Sadighi, a lawyer representing the set of Sculptor investors suing in New York, told the judge overseeing her case that she had received an email indicating the Delaware case had been resolved.
In the Delaware lawsuit, Sculptor Chief Investment Officer Jimmy Levin and directors of the firm were accused of shortchanging shareholders by using non-disclosure agreements to prevent them from considering the Weinstein's offer, backed by billionaires Bill Ackman, Marc Lasry and Jeff Yass.
Sculptor founder Dan Och initially opposed the Rithm bid but threw his support behind it after Rithm increased the offer and made other changes to its terms.
Sculptor shareholder Gilles Beauchemin, who brought the Delaware lawsuit, argues that Och changed his mind after securing "millions of dollars' worth of unique consideration" not shared with other Sculptor investors, and that the board's repeated rejections of the higher offer were partly to save Levin's job. Sculptor argues the Weinstein group's bid would face uncertainties in closing.
The New York lawsuit alleges that Sculptor zeroed out the value of shares that represented deferred compensation they were owed to facilitate the Rithm deal.
