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Illustration: Sarah Grillo/Axios

Sixth Street Partners CEO Alan Waxman is known for his sharp elbows, befitting someone who created a leader in special situations lending. Now he's jabbing one right in the gut of Dyal Capital Partners, which has owned a passive minority stake in Sixth Street since 2017.

Driving the news: Sixth Street has sued Dyal in Delaware Chancery Court, seeking to block Dyal's proposed merger with direct lender Owl Rock Capital, and the pair's subsequent agreement to go public via a SPAC at a $12.5 billion market cap.

The complaint won't be publicly released until Wednesday, once redactions are completed, but details have emerged from sources and via a letter that Sixth Street sent yesterday to its limited partners.

Plaintiff: Sixth Street is a multi-strategy investment firm that last year spun out of TPG, and which now has over $50 billion in assets under management. It claims that its contract with Dyal includes a clause whereby Dyal agrees not to ever directly compete with Sixth Street, and that merging with Owl Rock would materially violate that agreement.

  • Sixth Street also claims to have consent rights over a transference of its ownership stake, which it believes the merger and SPAC deal would constitute. As such, it either wants the deal blocked or some sort of carve-out.

Defense: Dyal, a Neuberger Berman subsidiary that primarily invests in alternative fund managers, is expected to respond that Sixth Street is misinterpreting the contractual language.

  • On the consent side, that would include a claim that Sixth Street only can block a transfer of ownership of the Dyal fund in which its stake is held, not of Dyal itself.
  • The head of a different firm in which Dyal has a stake tells me that there is indeed anti-competitive language in his firm's contract, but adds that it’s “very fuzzy.”

Behind the scenes: Multiple sources say that the two sides engaged in brief negotiations before the lawsuit was filed.

  • Sixth Street, which claims it first heard of the merger via a Wall Street Journal story, asked to buy back its stake at cost.
  • Dyal said no, saying to do so would violate its fiduciary duty to its own limited partners.
  • It stands to reason that Sixth Street's value has increased significantly since 2017, although Dyal is said to be carrying it at cost (plus distributions).

Added layer of complexity: The SPAC buying Dyal/Owl Rock is sponsored by HPS Investment Partners, in which Dyal owns a stake.

  • Moreover, Dyal invested in the PIPE for a prior HPS-sponsored SPAC deal (Desktop Metal). No wonder Dealbreaker referred to the Owl Rock tie-up as “the most incestuous SPAC deal yet.”

Coming attractions: Don’t be surprised if Dyal is hit with one or more additional lawsuits from its “partner” firms, possibly within the next week, and for all of us to get more clarity on the contract language tomorrow.

Go deeper

Updated 1 hour ago - Politics & Policy

Shooting at Michigan high school leaves 3 dead, 8 wounded

Police cars restrict access to Oxford High School following the shooting in Oxford, Michigan, on Tuesday. Photo: Matthew Hatcher/Getty Images)

A 15-year-old sophomore was arrested after a shooting at a Michigan high school that left three people dead and eight others wounded Wednesday, according to the Oakland County Sheriff's Office.

The latest: Oakland County Sheriff Michael Bouchard said at a briefing Tuesday night that the suspect's father had on Friday bought the 9mm Sig Sauer pistol investigators believe was used in the shooting at Oxford High School. Authorities released the names of the victims late Tuesday.

City Council member Andre Dickens wins Atlanta mayoral race

Atlanta Mayor-elect Andre Dickens in Atlanta, Georgia, late Tuesday. Photo: Paras Griffin/Getty Images

City Council member Andre Dickens won a runoff election Tuesday to become Atlanta's next mayor, soundly beating the council's president Felicia Moore.

The big picture: Dickens was just a few months ago considered to have an outside chance of replacing Mayor Keisha Lance Bottoms, who announced in May that she wouldn't seek a second term.

UN report: Pandemic set to cost global tourism $2 trillion in 2021

A tourist in front of the Eiffel Tower in Paris on Nov. 25. Photo:Chesnot/Getty Images

A new United Nations report warns that global tourism will see only modest revenue gains in 2021 after last year's historic losses amid the COVID-19 pandemic.

Why it matters: Tourism revenues in 2020 fell by more than half from the previous year — a significant blow to the global economy, according to analysis by the UN World Tourism Organization (UNWTO).