Warren Buffett’s insurance and reinsurance firm, Berkshire Hathaway, has reached an agreement to acquire all of the outstanding shares of Alleghany Corporation in an $11.6 billion transaction.
A definitive agreement between the pair sees Berkshire acquire all outstanding Alleghany shares for $848.02 in cash.
The deal has been unanimously approved by both Boards of Directors, and represents a total equity value of approximately $11.6 billion, with the acquisition price representing a multiple of 1.26x Alleghany’s book value at December 31st, 2021.
The acquisition price also 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 definitive merger agreement will expand Berkshire’s significant insurance and reinsurance market interests, and will include Alleghany’s reinsurance entity, TransRe.
Berkshire Hathaway’s Chairman and Chief Executive Officer (CEO), Buffett, commented: “Berkshire will be the perfect permanent home for Alleghany, a company that I have closely observed for 60 years. 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.”
Jefferson W. Kirby, Chair of the Alleghany Board of Directors, said: “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. 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.
“Berkshire Hathaway’s support, resources, and expertise will provide added benefits and opportunities for Alleghany and its operating businesses for many years to come.”
Expected to close in the fourth quarter of 2022, the deal remains subject to customary closing conditions, including approval by Alleghany shareholders and receipt of regulatory approvals.
Once the deal completes, Alleghany will continue to operate as an independent subsidiary of Berkshire Hathaway. It’s also been reported by the pair that Kirby, who owns 25% of Alleghany common shares, intends to vote his shares for the merger transaction.
The pair also report that under the terms of the agreement, Alleghany may actively solicit and consider alternative acquisition proposals during a 25-day “go-shop” period, and has the right to terminate the merger agreement to accept a superior proposal during this period, subject to the terms and conditions of the merger agreement.
The company says that there can be no assurances that the “go-shop” process will result in a superior proposal, and that it does not intend to communicate developments regarding the process unless and until Alleghany’s Board of Directors makes a determination requiring further disclosure.
Joseph P. Brandon, Alleghany’s President and CEO, said: “This is a terrific transaction for Alleghany’s owners, businesses, customers, and employees. 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.
“As part of Berkshire Hathaway, which epitomizes our long-term management philosophy, each of Alleghany’s businesses will be exceptionally well positioned to serve its clients and achieve its full potential.”
Goldman Sachs & Co. LLC is serving as financial advisor and Willkie Farr & Gallagher LLP is serving as legal advisor to Alleghany. Munger, Tolles & Olson LLP is serving as legal advisor to Berkshire.
It’s worth noting that Alleghany’s CEO Brandon was Chairman and CEO of General Re Corporation, a wholly-owned subsidiary of Berkshire Hathaway Inc., between 2001 and 2008.
Which suggests the alignment on strategy and culture is likely to be strong, making the fit even more appropriate.
