Rithm Capital Corp., a real estate investment trust, has signed an agreement to acquire Sculptor Capital Management Inc. for $639 million, according to an announcement Monday. Rithm, the entity behind businesses such as NewRez and Caliber, is set to inherit $34 billion in assets under management from Sculptor. This portfolio includes assets across real estate, credit, and multi-strategy investing.
The acquisition offers an opportunity for Sculptor to leverage Rithm's capital for sector-wide growth acceleration and the development of new funds and strategies. The per-share acquisition cost stands at $11.15 for Sculptor's Class A shares, an 18% premium over the July 21 closing price. The transaction, expected to be funded by Rithm's cash reserves and available liquidity, should have a neutral impact on its 2024 earnings and prove beneficial in 2025.
Rithm reported a GAAP net income of $68.9 million in Q1 2023, a decrease from the $81.8 million figure in the preceding quarter. With $1.4 billion in cash reserves, the company is set to release its Q2 earnings on Aug. 2.
The transaction is a "transformational" event, according to Michael Nierenberg, Rithm Capital's chairman, CEO, and president. He said, “The combination of Sculptor’s $34 billion AUM with Rithm’s $7 billion permanent equity capital and $30+ billion balance sheet forms a first-rate asset management firm.”
Upon completion of the acquisition, the existing investment and management teams at Sculptor will maintain their current roles. Key members of Sculptor's leadership, collectively holding about 26% of the company's outstanding voting shares, have committed to supporting the transaction.
Once the deal is finalized, Sculptor will function as a subsidiary under Rithm, with Jimmy Levin continuing in his leadership role as chief investment officer and executive managing partner, directly reporting to Nierenberg. In essence, Sculptor will remain committed to its existing operational structure and ethos, maintaining an emphasis on generating risk-adjusted returns on invested capital.
The transaction, which has received the approval of both Rithm and Sculptor's board of directors, is contingent upon customary closing conditions and is expected to conclude in Q4 2023. Notably, this announcement arrives just four days after Rithm acquired $1.4 billion in unsecured personal loans from Goldman Sachs' Marcus business unit. Nierenberg described this acquisition as "extremely attractive," attributing its appeal to Rithm's expertise in consumer finance.
Earlier in May, Rithm expressed considerations of spinning off its mortgage division to counteract its "extremely undervalued" stock, hinting at more potential transactions in the future.
