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Carlson buyout ends Barbican sale speculation

Carlson Capital's decision to buy out Steel Partners' minority stake in Barbican has ended any near-term prospect of the Lloyd's carrier being sold off.

Barbican's future ownership has been uncertain for over a year as Carlson and Steel explored options to advance the 2007 start-up.

Barbican is one of a number of Lloyd's businesses confronting issues around the scale of its business. Most market sources place critical mass in the £250mn+ range - well above the carrier's own £180mn stamp.

Initially, this exploration consisted of Barbican attempting to prosecute a transformative M&A deal to help it gain the scale needed for competitiveness.

The Lloyd's insurer's highest-profile failed merger attempt was Omega, but it is also understood to have made unsuccessful approaches to Jubilee and Hardy.

Barbican's efforts to secure a deal were hampered by its reliance on paper and the company's sub-mean underwriting record, leaving its backers with a restricted range of options.

In the summer Evercore was brought in to advise Barbican and its backers on its strategic options as Steel Partners pushed to liquidate its investment.

According to sources, Evercore was asked to carry out a valuation exercise on Barbican. The process was designed to determine the price for Carlson to buy out Steel, it is understood, although its secondary purpose was to see if there was interest in acquiring the whole of Barbican at an acceptable price.

Recent market chatter has suggested that Carlson would look to stick with its investment in Barbican due to a lack of interest at a desirable price, and that position now seems to have been borne out by the announcement.

Earlier this month, Carlson disclosed that it had acquired Steel's stake for an undisclosed sum to take its share in Barbican above 90 percent - a possibility first trailed by this publication in June.

Barbican CEO David Reeves said the transaction demonstrates Carlson's "long-term confidence in our business and future prospects".

One market source said that the move ends the protracted uncertainty surrounding the future ownership of Barbican. "I think they will look to hold onto it for at least a couple of years now so that they can try to maximise their value," they said.

Barbican is working to create a £29mn special purpose syndicate (SPS), which will be underwritten by former Ark US catastrophe underwriter James Winn for an initial two years.

The Names-backed SPS will allow Barbican to grow without increasing the amount of capital that its backers have to lodge at Lloyd's. It is also thought that Barbican has been in the market for a significant gearing quota share to support its growth ambitions.

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