Warren Buffett’s biggest deal in years: Berkshire Hathaway will buy insurance company Alleghany for $11.6 billion

In Warren Buffett's biggest deal in years, Berkshire Hathaway will buy insurance company Alleghany for $11.6 billion
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Berkshire Hathaway announced Monday morning that it has agreed to buy Alleghany Insurance for $11.6 billion in cash, or $848.02 per share. The acquisition “denotes a multiple of 1.26 times Alleghany’s valuation at December 31, 2021,” according to the Omaha, Nebraska-based conglomerate, as well as a 16 percent premium to Alleghany’s average stock price in the previous 30 days. The acquisition is scheduled to finalize this year in the fourth quarter.

Berkshire Hathaway’s largest acquisition in the last six years was the $37 billion purchase of industrial giant Precision Castparts, including debt.

Alleghany, based in New York, is involved in a variety of insurance businesses through its subsidiaries, including wholesale specialty, property and casualty, and reinsurance.

Buffett, Berkshire’s chairman, and CEO said in a statement that “Berkshire will be the appropriate permanent home for Alleghany, a company that I have closely observed for 60 years.”

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Berkshire Hathaway already owns Geico auto insurance, General Re reinsurance, and other insurance companies that have been driving development in recent years.

Alleghany CEO Joseph Brandon — who previously led General Re — praised the deal, calling it a “terrific transaction for Alleghany’s owners, businesses, customers, and employees,” noting that “the value of this payment needs to reflect the quality of our franchises and is the product of the Alleghany team’s hard work, persistence, and determination over decades.”

Holding business in 1929 before pivoting to insurance, similar to Berkshire Hathaway’s origins as a textile manufacturing company more than a century before becoming a multifunctional conglomerate.

To be fair, $11.6 billion is a little sum when compared to Berkshire’s vast cash hoard, which was estimated to be worth $146.72 billion at the end of 2021.

“The deal expands Berkshire’s footprint in the specialty insurance and reinsurance markets at a time when market circumstances remain favorable for development,” said CFRA Research analyst Cathy Seifert.

Alleghany’s stock increased by 25% on Monday. After closing above $500,000 for the first time last week, Berkshire’s Class A shares gained approximately 2% to an all-time high.

Throughout the acquisition, Goldman Sachs and Willkie Farr & Gallagher are advising Alleghany.

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