James River has engaged in sale talks with rival E&S insurer Global Indemnity as the Bermudian continues exploring strategic alternatives, Insurance Insider US can reveal.
The move comes a few days after this publication revealed that Global Indemnity had made an indicative offer to buy James River in an all-stock proposal at roughly $15.00 per share.
The non-binding approach, which valued the carrier at roughly $550mn, followed various attempts by Global Indemnity in prior months.
Sources said that the E&S carriers were now poised to start due diligence work.
Following this publication’s report, James River’s stock soared nearly 17.5% to close at $7.93 per share last Friday.
The rally followed a steady decline all week from a little over $9 on Monday to as low as $6.38 at midday on Thursday. The slide began after James River announced Monday it was suing Fleming Intermediate Holdings over the legacy carrier’s refusal to complete the $277mn casualty re transaction announced last November.
The deal – which valued James River Re at around 75% of book – was widely perceived by Fleming Re’s competitors as a significant overvaluation of the business, exposing the legacy acquirer to significant losses from adverse reserve development.
Fleming’s CEO Eric Haller said in a statement that the complaint “misrepresents” the facts, and Fleming “has no obligation to close the transaction”.
On March 9, this publication reported that James River had been unable to secure a binding offer that hit its target valuation on February 19.
However, rather than pull the process, it is understood to have remained engaged with bidders – including HDI and Arch – and indicated there would be a fresh bidding round later this month.
Sources said that given the challenges the process is facing, James River had shown that a wider range of options was now being considered to get a transaction to the line, which included taking a reserve charge, and buying a legacy cover or a part-sale of the group.
Last October, Insurance Insider US broke news that James River had weighed a potential disposal of its fronting subsidiary Falls Lake amid a flurry of fronting M&A.
James River retained Citi and Ardea Partners late last year to explore strategic options, including a full or partial sale of the company.
Global Indemnity declined to comment. James River did not respond to a request for comment.