Sixth Street Sues to Block Dyal’s Merger With Owl Rock


Sixth Street Partners sued to block Dyal Capital Partners’ merger with Owl Rock Capital Partners, arguing the deal would trample on its earlier pact with Dyal.

Sixth Street asked a judge to put the combination on hold until she can determine whether a 2017 agreement gives the New York-based investment firm the power to kill the deal. In court filings, Dyal said Sixth Street is misinterpreting the pact and seeking to create leverage “for its own financial gain.”

Under the 2017 deal, Dyal bought a stake of about 10% in Sixth Street. Then, in December, Dyal and Owl Rock announced they would join forces in a complex merger. It would allow them to go public with $45 billion in assets and a new name, Blue Owl, through a special purpose acquisition company, better known as a SPAC.

“The proposed merger would fundamentally compromise the bargain Sixth Street struck in partnering with Dyal,” Sixth Street’s lawyers said in a 33-page complaint.

Sixth Street disclosed in a Feb. 12 court filing that it had sued in Delaware state court to have Judge Morgan Zurn interpret the 2017 Dyal agreement to “enforce plaintiffs’ consent rights.” A redacted version of the lawsuit was made public Friday.

Sixth Street’s claims are “baseless,” David Wells, a spokesman representing Dyal and Owl Rock, said earlier this week. “Sixth Street is attempting to assert the existence of a consent right that we believe simply does not exist.”

Dyal takes stakes in firms, some of which compete for the same business as Owl Rock, which has fast grown into a dominant player in the direct-lending market. Sixth Street officials said in a letter this month that they couldn’t abide having Dyal become a competitor through the Owl Rock deal.

Sixth Street sued in Delaware because the state’s law covers the Dyal investment agreement, the fund said. Delaware is the corporate home to more than half of U.S. public companies and more than 60% of Fortune 500 firms. Zurn and other chancery judges hear cases without juries and can’t award punitive damages.

The court is heralded for quickly deciding byzantine merger-and-acquisition disputes. Last year, a Delaware judge blessed a move by Mirae Asset Global Investments to pull out of a $5.8 billion acquisition of 15 U.S. luxury hotels owned by China-based Dajia Insurance Group because of problems tied to the coronavirus pandemic.

Sixth Street wants Zurn to fast track its request to temporarily block the deal to avoid being put in the position “of being partially owned by a direct competitor, which will enjoy control and information rights putting Sixth Street at a material and enduring competitive disadvantage,” the fund said in a court filing.

Dyal’s lawyers want Zurn to force Sixth Street to publicly file an unredacted version of the agreement covering Dyal’s 2017 stake purchase to buttress their argument that Sixth Street is intentionally misreading its consent rights to pressure Dyal to sell back the holdings in the fund.

“The desire to avoid clarity is precisely why Sixth Street does not want the Investment Agreement to be made public,” Dyal’s attorneys said in a Friday court filing.

Sixth Street has “orchestrated a one-sided and misleading media campaign designed to poison the well with Dyal’s investors and the public at large” as part of an effort to “strong arm Dyal into selling its stake in Sixth Street at a price that is grossly unfair,” they said.

Dyal is attempting to coerce Sixth Street into publishing its confidential information in full when only a few short paragraphs are relevant to the dispute, Patrick Clifford, a Sixth Street spokesman, said in an emailed statement.

The case is Sixth Street Partners Management Co. v. Dyal Capital Partners, No. 2021-0127, Delaware Chancery Court (Wilmington).

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