Berkshire Hathaway (NYSE: BRK.A; BRK.B) will acquire the outstanding shares of insurance company Alleghany Corporation (NYSE: Y) in a deal aiming to expand Berkshire Hathaway’s insurance portfolio.
According to the March 21 agreement, Berkshire Hathaway will acquire the outstanding shares of Alleghany for $848.02 per share in cash, the equivalent of $11.6 billion. The consideration represents 1.26 times Alleghany’s value as of the end of December 2021 and a 29% premium average stock price over the last 30 days.
As noted in the filings, Alleghany manages investments, led by property and casualty reinsurance and insurance. Berkshire Hathaway is a multinational conglomerate holding company. The move will add Alleghany’s reinsurer Transatlantic Holdings Inc to Berkshire’s insurance portfolio, which includes Geico and reinsurer General Re.
“Berkshire will be the perfect permanent home for Alleghany, a company that I have closely observed for 60 years,” Warren E. Buffett, Berkshire Hathaway’s Chairman and Chief Executive Officer said in a press release. “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.”
The deal has a 25-day go-shop provision ending at 11:59pm on April 14, 2022. Pursuant to the provision, Alleghany “may actively solicit and consider alternative acquisition proposals.” Alleghany also has the right to end the merger agreement to accept a better proposal subject to the agreement’s terms and conditions.
“My family and I have been significant shareholders of Alleghany for over 85 years and are proud that our ownership will culminate through this compelling transaction with Berkshire Hathaway,” Jefferson W. Kirby, Chair of the Alleghany Board of Directors, said in a press release. “Not only does this deal provide substantial and certain value to stockholders, but it provides a rare opportunity to join forces with a like-minded and highly respected investor and business leader.”
After the deal is completed, Alleghany will continue to operate as an independent subsidiary of Berkshire Hathaway.
“This is a terrific transaction for Alleghany’s owners, businesses, customers, and employees,” Joseph P. Brandon, President and Chief Executive Officer of Alleghany said in a press release. “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.”
The reverse triangular merger is expected to close in Q4 2022, subject to customary closing conditions as well as Alleghany shareholder and regulatory approval.
Alleghany is represented by Willkie Farr & Gallagher LLP and its financial advisor is Goldman Sachs & Co. Berkshire Hathaway is represented by Munger, Tolles & Olson LLP.
This is the latest transaction in Berkshire Hathaway’s long list of deals, such as its acquisition of Dominion Energy’s gas transmission and storage segment assets for $9.7 billion in 2020 and the sale of its newspapers and related publications business to Lee Enterprises for $140 million and its acquisition of Precision Castparts in 2015 for $37.2 billion.
Prior to the announcement, Alleghany’s stock was valued at $676.75 on March 18. When it was announced on March 21, stock jumped to $844.60 and more than a week later on April 4, stocks closed at $852.15.
