Blue Wolf Bites Limited Partner?

Blue Wolf Capital Management is a New York-based private equity firm focused on the complex middle-market opportunities. Back in the summer of 2006, it said that it had received a cornerstone LP agreement for its debut fund of $43.5 million from Johnnic Holdings, an affiliate of listed South African company Hosken Consolidated Investments. All seemed well and good – or at least until Blue Wolf filed suit against Johnnic this past August, in New York District Court.

At issue is the LP commitment, which was always subject to approval by South African regulators. It seems that Johnnic never actually requested said approval, which Blue Wolf believes should void the agreement (given that it’s more than a year later). Johnnic, on the other hand, apparently believes that the agreement lives on in perpetuity – since the reason it didn’t formally request approval was that government officials told them informally that such a request didn’t have a snowball’s chance in hell (or whatever the proper South African euphemism is). In other words, Johnnic wants to wait until regulatory sentiments change.

So that’s where things currently stand – although I hear that things aren’t as bad as the court filings would indicate. First of all, Johnnic already has made a one-off investment with Blue Wolf, in order to help acquire landfill-gas collector Montauk Energy Capital. That deal was considered so strong that it won the Buyouts Small Deal of the Year award, at the latest Buyouts Symposium East. Perhaps more importantly, the suit seems to have brought both sides back to the bargaining table – with a decent chance that the suit could actually be withdrawn within the next week…
Here is the complaint: bluewolf1.pdf
Here is the original agreement: bluewolf2.pdf