Warren Buffett’s holding company, Berkshire Hathaway (BRK.B), is buying insurance company Alleghany (Y) for $11.6 billion U.S., or $848.02 U.S. per share, in cash.
Berkshire Hathaway said the deal “represents a multiple of 1.26 times Alleghany’s book value at December 31, 2021,” as well as a 16% premium to Alleghany’s average stock price over the past 30 days. The deal is expected to close in the fourth quarter of this year.
Alleghany shares rallied more than 15% in premarket trading on news of it being acquired.
“Berkshire will be the perfect permanent home for Alleghany, a company that I have closely observed for 60 years,” Buffett, Berkshire’s chairman and chief executive officer (CEO), said in a written statement.
The deal may surprise some Berkshire Hathaway shareholders as Buffett and his right-hand man, vice chairman Charlie Munger, have expressed frustration in their search for a big acquisition. In his 2022 annual letter to shareholders, Buffett said he and Munger found little that excites them in terms of large acquisitions in the current market.
Also, $11.6 billion U.S. is a relatively small number when compared with Berkshire Hathaway’s massive cash pile of $146.72 billion U.S. at the end of 2021.
Berkshire Hathaway already owns several insurance companies, including Geico and General Re.
