Dan Och asks Sculptor to release records on Rithm agreement

Willoughby Capital’s Dan Och said in letter to Sculptor Capital (SCU), “We have been consistent in expressing our longstanding view that efforts by the Board of Directors at large and the Special Committee to protect management compensation have come at the shareholders’ expense. The preliminary proxy statement confirms our concerns. The Special Committee turned away higher bids that would not entrench management’s compensation, and Rithm itself initially agreed to offer $12 a share, but reduced its offer a full dollar per share, because, as Rithm (RITM) acknowledged in the proxy, “it would need to spend more money than anticipated in the form of a long-term incentive plan and retention plan for the Company’s senior leadership.” The preliminary proxy statement also makes clear that Mr. Levin not only continues to benefit from his indefensible compensation agreement, but has received from Rithm a walk-away right that creates instability for fund investors and makes any limitations on his 2024 compensation entirely illusory. Under Mr. Levin’s side letter agreement with Rithm, if Rithm and he do not agree to renegotiate his contract in 2024 for any reason, Mr. Levin may leave the Company with a substantial severance package, which provides for both an acceleration of all his deferred compensation and that all of his incentive units – many of which were granted only because of the Board’s original failure of oversight in early 2022 – would vest and become payable. This valuable right surely subtracted from what Rithm would pay to the shareholders. It further ensures that Mr. Levin’s attentions will remain devoted to renegotiating and maximizing his own compensation, rather than maximizing returns for fund investors. As we have seen over the past three years, this is nothing more than a recipe for future instability for the Company, its shareholders, its fund investors, and its employees. Unfortunately, we believe the preliminary proxy statement omits even worse parts of this story. As a result, we enclose a demand letter pursuant to Section 220 of the Delaware General Corporation Law. We believe that the Company’s records will reveal a process that, in violation of fiduciary obligations, ignored potential transactions that would have maximized value for shareholders and ensured better outcomes for the fund investors of the Company’s investment vehicles. We further believe that both shareholders and fund investors should only consent to a structure that avoids the worst of the current status quo: unconscionable compensation for the management team and the ability of that same team to again hold fund investors hostage in the future to negotiate even better terms. We believe that the shareholders and the fund investors are entitled to make their decisions on this transaction with all of the information that would be material to them. Third parties have highlighted that the Special Committee’s lack of that transparency and unnecessary restrictions do not serve the best interests of shareholders.”