Warren Buffett’s Berkshire Hathaway said it agreed to buy insurer Alleghany for $11.6 billion in cash. “Berkshire would be the perfect permanent home for Alleghany, a company I have followed closely for 60 years,” Buffett said in a statement.
Alleghany, which owns property and casualty business, is seeing property and casualty pricing rise across the board as insurers hedge against climate-related losses and the impact of low-interest rates. The company also owns a range of non-insurance businesses through acquisitions, including steel manufacturing, toys and funeral supplies. The company has also earned the nickname “mini Berkshire” because of its similar investment strategies.
The deal is Buffett’s first multi-billion-dollar acquisition since acquiring Dominion Energy’s natural gas assets in 2020, and the largest since 2016’s nearly $35 billion acquisition of Precision Controls trade.
Buffett’s Berkshire Hathaway (BRK.A.US) reportedly bought insurance company Alleghany (Y.US) for $848.02 per share. However, market participants found the purchase price a bit odd, just because Buffett didn’t Willing to pay investment banking fees.
The $848.02 per share purchase price is the result of Berkshire Hathaway’s proposed $850 per share price less about $27 million in fees for Alleghany to hire Goldman Sachs financial advisers, according to people familiar with the matter.
Still, the Alleghany acquisition remains Berkshire’s largest deal since 2016, according to compiled data. But the $11.6 billion needed for the deal is a small amount compared to Berkshire Hathaway’s massive $146.72 billion cash hoard at the end of 2021, and it doesn’t belong to the “elephant” Buffett has repeatedly referred to. level” trading opportunities.
Buffett’s reputation for frugality may also have helped Berkshire Hathaway’s stock outperform the market since the start of the year. Data show that on Tuesday, Berkshire Hathaway A and B shares (BRK.B.US) both hit record highs, reaching $532,530 and $354.95, respectively. Since the beginning of this year, Berkshire Hathaway’s A shares have risen by more than 16%, and B shares have risen by more than 17%, compared with a 5.3% decline in the S&P 500 over the same period.