“This isn’t a case of purchaser’s regret” – Fleming on JRG Re lawsuit

Fleming Insurance coverage Holdings has mounted a authorized protection in opposition to the lawsuit introduced by James River Group (JRG) associated to the stalled acquisition of JRG’s reinsurance division, JRG Re.

Paperwork filed by Fleming’s authorized workforce, together with sworn statements from firm executives, counter JRG’s request for a preliminary injunction within the wake of the deal’s failure.

Fleming’s authorized filings define the corporate’s stance, asserting that the dispute shouldn’t be about reconsideration of the acquisition however stems from what Fleming describes as misleading practices by James River after the preliminary settlement.

“This isn’t a case of purchaser’s regret. It’s a bait and change,” the corporate stated in its filings. “Fleming was excited to purchase JRG Reinsurance and stays keen to take action.”

Nonetheless, in accordance with Fleming, following the signing of the Inventory Buy Settlement in November 2023, James River allegedly engaged in actions that breached the settlement’s stipulations, notably involving reserve practices and liquidity changes that deviated from established norms.

These actions, Fleming contends, not solely contravened particular prohibitions within the settlement but additionally failed to satisfy a number of situations obligatory for the transaction’s closure.

“Not simply drastic”

Fleming argued in opposition to the issuance of a preliminary injunction, suggesting that such authorized cures shouldn’t be used to implement particular efficiency of a merger and acquisition deal, particularly when alleged violations by the vendor stay unresolved.

“A preliminary injunction is… not a instrument to power particular efficiency of an M&A transaction, significantly when the vendor has violated categorical situations and shutting situations are unhappy…  The reduction Plaintiff seeks isn’t just drastic, it’s unprecedented,” Fleming stated.

Moreover, Fleming outlined allegd particular breaches by James River, together with deviations from prior reserving practices and the improper administration of an intercompany receivable, which, in Fleming’s view, absolves it from fulfilling the obligations below the prevailing phrases.

The filings additionally element how James River’s administration of the reinsurer post-agreement purportedly altered the transaction’s monetary dynamics considerably. Within the filings, Fleming accuses James River of concealing adjustments to the reinsurer’s reserving practices and liquidity administration till it was too late for these to be factored into the acquisition negotiations.

Notably, Fleming factors to a shift in James River’s reserves and liquidity practices as materially impacting the agreed buy value and violating each the signed settlement and Bermuda legislation. These allegations have been additionally identified in a category motion introduced up by a legislation agency in December, citing “lack of efficient inside controls over reinsurance.”

Fleming stays “keen”

In response to James River’s swimsuit, Fleming has sought remediation from the insurance coverage group to right the recognized breaches, suggesting changes to reserves and liquidity to facilitate the transaction’s completion.

“On Saturday, March 2, nonetheless in search of a path to closing, Fleming defined the steps it might take into account adequate to treatment James River’s breaches and allow closing: particularly a correction to the reserves and an infusion of liquidity such that [the reinsurer] had liquid belongings to pay three months’ price of bills,” Fleming stated.

Nonetheless, communication between the businesses has to date not yielded a decision, with Fleming alleging that James River’s response to remediation requests had been significantly terse.

“This week’s submitting outlines in painstaking element the steps James River Group took in its try and ship JRG Reinsurance to Fleming in a situation that dramatically violated the events’ settlement. Whereas Fleming will proceed to defend itself in opposition to this meritless lawsuit, we stay keen to accumulate JRG Reinsurance if James River cures its breaches of the settlement,” Fleming CEO Eric Haller stated.

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