Berkshire Hathaway Inc. announced on Monday it entered into a "definitive agreement" to purchase insurance company Alleghany for $11.6 billion, or $848.02 per share, in cash. This deal would strengthen the insurance arm of Warren Buffett's investment vehicle.
"The acquisition price represents a multiple of 1.26 times Alleghany's book value at December 31, 2021, a 29% premium to Alleghany's average stock price over the last 30 days and a 16% premium to Alleghany's 52-week high closing price," a Berkshire press release read.
Berkshire, whose underwriting businesses includes: GEICO, Berkshire Hathaway GUARD Insurance Companies, Berkshire Hathaway Specialty Insurance, Gateway Underwriters Agency, MedPro Group, and General RE, among others, said it expects to close the Alleghany deal by the end of the year.
"Berkshire will be the perfect permanent home for Alleghany, a company that I have closely observed for 60 years," Buffett said.
Alleghany CEO Joseph Brandon, who was previously the CEO at Berkshire-owned General Re, praised the deal as a "terrific transaction for Alleghany's owners, businesses, customers, and employees," noting that "the value of this transaction reflects the quality of our franchises and is the product of the hard work, persistence, and determination of the Alleghany team over decades."
This morning's announcement may surprise some as Buffett's right-hand man, vice chairman Charlie Munger, recently expressed frustration in his search for finding the next big acquisition. On page eight of Berkshire's latest shareholder letter, Buffett and Munger discussed, "today, though, we find little that excites us," referring to their ability to find a deal.
Well, they found Alleghany...