Warren Buffett’s insurance company and reinsurance, Berkshire Hathaway, has agreed with Berkshire Hathaway to acquire all remaining shares in Alleghany Corporation in an $11.6 billion transaction. A final agreement between the two firms will see Berkshire purchase all of the remaining Alleghany shares at $848.02 for cash.
The deal was unanimously approved by the two Boards of Directors and had $11.6 billion. The purchase cost represented a multiplier of 1.26x Alleghany’s book value on December 2021.
The acquisition price also represents an increase of 29% over Alleghany’s average stock price for the past 30 days and a 16% increase to Alleghany’s 52-week high closing price.
The final merger agreement will extend Berkshire’s substantial insurance and reinsurance market stakes and include Alleghany’s Reinsurance subsidiary, TransRe.
Berkshire Hathaway’s chairman and chief executive officer (CEO), Buffett, said: “Berkshire will be the ideal permanent location for Alleghany which is a company I have been watching closely over the last 60 years. Through 85 years, they have been in business for 85 years. Kirby family has built an enterprise that shares numerous similarities to Berkshire Hathaway. I am extremely happy that I can once more be working with my friend from the past, Joe Brandon.”
Jefferson W. Kirby, Chairman of the Alleghany Board of Directors, stated: “My family and I have been major shareholders in Alleghany for more than 85 years. We’re thrilled to see our stake be rewarded in this exciting deal that will be completed with Berkshire Hathaway. The deal does not only bring substantial and reliable benefits to stockholders, and it offers a rare opportunity to collaborate with a similarly-minded and well-known business and investment leader.
“Berkshire Hathaway’s assistance, resources, and knowledge will offer additional benefits and opportunities to Alleghany and its business operations in the years to in the future.”
The deal is expected to close in the fourth quarter of 2022. The deal is subject to closing conditions that are typical for deals, including approval by Alleghany shareholders and receipt of the necessary regulatory clearances.
Alleghany will continue to be an unrelated subsidiary to Berkshire Hathaway when the deal is concluded. There have also been reports by the two that Kirby is, the owner of 25 percent of Alleghany common shares, is planning to use his shares to vote in the merger deal.
The two report that Alleghany can actively invite and review alternative acquisition options following the contract within up to 25 days’ “go-shop” period. It is also entitled to end the merger agreement to take an alternative proposal following the conditions and terms in the agreement.
Alleghany says it cannot be certain it will successfully ensure that its “go-shop” procedure will produce an excellent idea. It will not be able to share any developments concerning the process unless or until the Alleghany Board of Directors decides that requires additional disclosure.
Joseph P. Brandon, Alleghany’s president, and CEO said: “This is a terrific deal for Alleghany’s owner’s customers, business owners, and employees. Its value deal reflects the quality of our franchises and is the result of the hard-working perseverance, determination, and persistence of Alleghany’s Alleghany team over decades.
“As an integral part of Berkshire Hathaway, which epitomizes our long-term management approach Alleghany’s business will be ideally placed to meet the needs of its clients and realize its maximum potential.”
Goldman Sachs & Co. LLC is acting as a financial advisor. Willkie Farr & Gallagher LLP serves as the legal advisor for Alleghany. Munger, Tolles & Olson LLP serves as the attorney for Berkshire.