In J-school, you learn to lead with your best stuff. So:
ACE’s allegations range from the facially inaccurate to the apparently clairvoyant, but they all boil down to one evident principle: ACE wishes it had signed a different contract.
From that, I think you can tell the writer – New York Life – is in a snit. The dispute centers on the amount ACE will pay for a New York Life’s Korean subsidiary. It’s playing out in New York State Supreme Court, and SNL Financial has details behind its firewall.
ACE agreed to pay $74.7M for the unit, subject to post-closing adjustments, part of a much larger deal for New York Life Insurance Worldwide. These adjustments cover issues that arise after the original deal is struck – a tiny accounting adjustment is uncovered, or some event changes the value of the company. The adjustments are usually trivial.
Not this time.
ACE says the price should come down more than 25% – $20.9M, citing accounting glitches New York Life uncovered after the deal was struck.
New York Life does not agree. It says the price should go up $17.7M.
So now you have two parties $39M apart on a $75M deal. A gap like that, the deal should die. Instead, it has gone to court.
But the dispute isn’t over the sales price – that will come later. For now, the companies are arguing whether the dispute should end up in court or in an arbitration.
Like most insurance deals, this one had an arbitration clause – sending contract disputes to an arbitration panel, in lieu of court.
ACE argues that in this unique circumstance, arbitration would cause the famed irreparable harm. New York Life gets shirty at the thought:
As ACE well knows, however, the parties are bound to the contract that they signed, not to the imaginary one that ACE now wishes it had negotiated. Not only does the contract between the parties not limit the purchase price adjustment procedures in the myriad ways concocted by ACE in its complaint, but it contains an explicit arbitration provision for disputes exactly like the one at issue here.
No surprise that NY Life worries a court date could cause it irreparable harm.