MidOcean, Ripplewood scuttle merger plans

MidOcean Partners and Ripplewood Holdings have canceled a proposed merger, and instead will continue to operate independently. MidOcean recently held a first close on its third fund, targeted at $1 billion, while Ripplewood last year floated a BDC-type fund on the Euronext in Brussels.

The two buyout firms announced their intentions to merge in April 2004, but acknowledged that the process could last between 12 and 24 months. In the short-term, they were expected to operate independently, but with the preference of collaboration on U.S. and European transactions. Ripplewood would continue to go it alone in Asia—where it had a strong foothold—because MidOcean’s limited partner agreement prohibited investment in the region.

Once the firms began to run short of dry powder, the plan was to raise a joint vehicle under the Ripplewood banner. Tim Collins, senior managing director of Ripplewood, would have shared his title with MidOcean CEO Ted Virtue.

Somewhere along the way, however, the two firms stopped seeing eye to eye. By the time MidOcean began raising its third fund earlier this year, Ripplewood wasn’t even a talking point.

Virtue confirmed for PE Week that the two firms no longer plan to raise a joint fund, and hinted that part of the problem related to Ripplewood’s decision to go public. “We still believe in the private fund model,” he explains. “It is still possible that we’ll collaborate on future deals if it is accretive to our investors.”

Virtue declined to comment on MidOcean’s current fund-raising effort, due to regulatory restrictions. The firm spun out of Deutsche Bank in 2003, and quietly closed on $540 million for its second fund shortly after the merger announcement. A spokesman for Ripplewood declined to comment. Collins did not respond to a request for comment before PE Week’s press time.

At the time the merger was announced in May 2004, Virtue told Buyouts, a sister publication to PE Week: “We think that this will be accretive to both the Ripplewood and MidOcean platforms. It is meant to leverage both of these pools of experience, skill sets, track records and geographic coverage.”

But by April 2005, there was some hint that the merger might not be on track. At that time, Ripplewood made no mention of MidOcean in an SEC filing related to its IPO, according to Buyouts.