‘No Breach’, court orders Fleming to complete James River deal in a week

James River has obtained a court order mandating Fleming to complete its pending acquisition of JRG Reinsurance, following an acrimonious dispute that led to litigation in the New York County Supreme Court last month. The court ruled that Fleming had no valid grounds to delay the closing, stating that “there is no breach” to justify its claim against James River.

The Bermuda-based re/insurer announced today (April 08) that the New York County Supreme Court’s Commercial Division has granted a preliminary injunction against Altamont Capital Partners-backed Fleming Intermediate Holdings. The court ordered Fleming to complete its acquisition of third-party casualty reinsurer JRG Re by April 16, 2024.

The Stock Purchase Agreement (SPA) between the two companies was executed on November 8, 2023, under which Fleming was to acquire JRG Re for $277 million, consisting of a $139 million pre-closing dividend and a $138 million cash payment.

However, Fleming failed to appear at the closing and instead sent a letter on March 2, 2024 demanding a $78 million concession as a condition to close, according to the court document. Fleming argued that JRG Re’s reserves were below historical levels, requiring JRGH to inject additional funds for liquidity to cover three months of claim payments and operating expenses.

The court document stated that the breaches alleged by Fleming were “contrived and contrary” to the clear terms of the SPA.

“There is no breach for Fleming to rely on to delay the closing,” it ruled. “Based on the SPA, the court finds that the breaches Fleming asserts against JRGH are not breaches at all. Rather, in the absence of a breach by JRGH, Fleming is in breach.”

Consequently, the court granted James River’s motion for a mandatory injunction directing Fleming to close the deal immediately at the contract price specified in the SPA, without any concession in price.

“JRGH has more than satisfied the traditional elements and established the additional requirements for a mandatory injunction: a clear right under the traditional criteria and extraordinary circumstances.” the court said.

In its ruling, the court noted that Fleming had the opportunity to negotiate a certain level of reserves but failed to do so.

“Fleming could have, but did not, negotiate a certain level of reserves. Fleming cannot use this court to rewrite the SPA,” it said.

Frank D’Orazio, James River chief executive officer, commented on the decision: “We are pleased that the Court has granted James River’s request for a preliminary injunction, compelling Fleming to complete the acquisition of JRG Re in accordance with the Stock Purchase Agreement that the parties negotiated together and executed on November 8, 2023. We look forward to finalizing the transaction.”

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