Warren Buffett to buy Alleghany for $11.6B in return to dealmaking

Berkshire Hathaway Inc. is buying Alleghany Corp. for $11.6 billion in cash, as Warren Buffett returns to the dealmaking he has shied away from in recent years.

Berkshire Hathaway will acquire all outstanding Alleghany shares for $848.02 per share in cash, according to a statement Monday. The transaction represents 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, the statement said.

Buffett is diving deeper into the world of insurance with the Alleghany deal, an industry that has been key to the growth of Berkshire into a conglomerate with a market value of more than $750 billion. With Alleghany, Berkshire gains a large property-casualty insurer that also has reinsurance operations through its Transatlantic Holdings Inc. unit. The business is run by Joseph Brandon, who previously used to be chief executive officer of a Berkshire insurer, General Re.

“Berkshire will be the perfect permanent home for Alleghany, a company that I have closely observed for 60 years,” Berkshire CEO Buffett said in the statement. “I am particularly delighted that I will once again work together with my long-time friend, Joe Brandon.”

The transaction is Berkshire’s largest since its 2016 acquisition of Precision Castparts Corp., according to data compiled by Bloomberg. That deal was valued at $37.2 billion, including debt.

Cash Pile

The Omaha, Nebraska-based billionaire has been seeking ways to put some of his conglomerate’s almost $150 billion pile of cash to work in higher-returning assets, but has struggled to find attractive options given high valuations. He’s increasingly turned to stock buybacks, a capital deployment move he largely shunned for decades, and earlier this month he built up Berkshire’s stake in Occidental Petroleum Corp.

The Alleghany deal terms include a “go-shop” period where the insurer can solicit and consider other acquisition proposals for 25 days, the companies said in the statement. The transaction, which was unanimously approved by both boards of directors and has the support of 2.5% shareholder and Alleghany chair Jefferson Kirby, is expected to close in the fourth quarter of 2022, subject to customary closing conditions.

Alleghany, led by Brandon, will continue to operate as an independent unit when it joins Berkshire. The two companies share a history of railroads and insurance. Alleghany was formed as a holding company for some railroad holdings in 1929 but eventually diversified into insurance, according to its website. Berkshire, which counts insurers from Geico to Gen Re as part of its business, also currently owns railroad BNSF.