Summary List Placement
Dyal Capital Partners invested and lent a total of $925 million to private-equity firm Veritas Capital last year in a deal structured in a way that disadvantaged the family of its late founder, according to claims in a new lawsuit.
Family members of Robert McKeon, who founded Veritas in 1992 after a period at the boutique investment bank Wasserstein Perella, claim the firm’s principals wouldn’t share information that they needed to vet the Dyal deal before it closed last October. The McKeon family said details that have come to light show they were deprived of at least $20 million.
The McKeons’ lawsuit, filed in New York state court on Wednesday, says Veritas CEO Ramzi Musallam, managing partner Hugh Evans and partner Benjamin Polk structured the deal in a way that meant Dyal’s $200 million loan reduced the value of Veritas. In addition to the loan, Dyal paid $725 million for a 11.79% stake in Veritas, which allegedly should have been higher.
It also claims Musallam, Evans and Polk “are distributing the proceeds from the loan among themselves.” Under the terms of an agreement the principals signed in late 2012, shortly after Robert McKeon’s death, 10% of that amount should have flowed to the McKeons or their trusts, according to the lawsuit.
Veritas is known for its investments in defense contractors, the software industry, and education companies, including a recent $3.4 billion deal to add business lines from Northrop Grumman to its portfolio company Peraton. It listed about $20 billion under management on its most recent Form ADV.
Dyal, a unit of asset manager Neuberger Berman that has lent to and taken stakes in dozens of alternative asset managers, is not named as a defendant in the suit. A spokesman for the company declined to comment.
The Veritas case comes on the heels of an action filed by the investing firm Sixth Street Partners to stop a merger between Dyal, which owns part of Sixth Street, and Owl Rock Capital Partners, one of Sixth Street’s competitors. Dyal and Owl Rock revealed plans in December to go public via a special purpose acquisition company that would dub the combined entity Blue Owl.
The McKeons, who are represented by Joshua Polster and Craig Waldman from the law firm Simpson Thacher & Bartlett, also allege that they were cheated out of a portion of the equity part of Dyal’s investment in Veritas. That amount is about $13.2 million, according to figures given in the lawsuit, although the complaint doesn’t explicitly say that amount is owed.
The McKeon family members suing include Matthew J. McKeon, Clare McKeon, Jacqueline McKeon, Alexander McKeon, James McKeon and Robert McKeon Jr.
A spokesman for Veritas said the firm “will vigorously defend against this baseless lawsuit.”
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