Berkshire Hathaway Inc. BRK.B 1.90% on Monday said it agreed to buy insurer Alleghany Corp. Y 24.59% for about $11.6 billion, as billionaire Warren Buffett’s investment vehicle puts some of its massive cash pile to work in a deal that bolsters its insurance arm.
Berkshire said it will pay $848.02 a share in cash for Alleghany, a 25.3% premium to Friday’s closing price of $676.75 and a multiple of 1.26 times the New York company’s book value at the end of 2021.
Berkshire, an Omaha, Neb., conglomerate with sprawling insurance operations that include Geico, said it expects to complete the acquisition by the end of the year.
Mr. Buffett’s company, which also holds a giant stock portfolio and an array of railroad, energy and consumer businesses, didn’t make any large acquisitions in 2021 and ended the year with $146.7 billion in cash, cash equivalents and short-term Treasury bills.
Alleghany is best known for its core property and casualty insurance businesses but has also accumulated a diverse group of increasingly profitable noninsurance divisions and has been likened to a mini Berkshire.
Joseph Brandon, who headed Berkshire’s General Re division from 2001 to 2008, took the helm as CEO of Alleghany in January.
“Berkshire will be the perfect permanent home for Alleghany, a company that I have closely observed for 60 years,” Mr. Buffett said Monday. “Throughout 85 years the Kirby family has created a business that has many similarities to Berkshire Hathaway. I am particularly delighted that I will once again work together with my long-time friend, Joe Brandon.”
Berkshire said the deal includes a 25-day “go-shop” period under which Alleghany can seek a better offer, adding that Alleghany and its units will continue to operate as an independent entity upon closing, with increased capital strength and support from Berkshire.
Write to Colin Kellaher at [email protected]
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