Alleghany to be Acquired by Berkshire for $11.6 Billion in Warren Buffett's Latest Major Deal

• On Monday morning, Berkshire Hathaway announced that it had agreed to purchase insurance company Alleghany for $11.6 billion, or $848.02 per share, in cash.
• Alleghany's book value at December 31, 2021, was multiplied by 1.26 times in the conglomerate's deal, which also included a 16% premium above Alleghany's average stock price over the past 30 days.

Warren Buffett just announced his biggest deal since 2016.

Monday morning, it was announced that the conglomerate would purchase the insurance company Alleghany for $11.6 billion, or $848.02 per share, in cash. The Omaha, Nebraska-based company stated that 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 in the past 30 days. The deal is expected to close in the fourth quarter of this year.

The acquisition of Precision Castparts by Berkshire for $37 billion, including debt, would be the conglomerate's largest purchase in six years.

Alleghany, a New York-based conglomerate, is involved in various insurance businesses, including wholesale specialty, property and casualty, and reinsurance, just like Berkshire, which owns a steel company, a toy maker, and a funeral services firm, in addition to its primary insurance business.

Berkshire will be the ideal permanent location for Alleghany, a company that I have closely monitored for 60 years, as stated by Buffett, Berkshire's chairman and CEO.

Geico auto insurance, General Re reinsurance, and other insurance companies owned by Berkshire have been driving growth in recent years, making insurance one of Berkshire's key businesses.

Alleghany CEO Joseph Brandon, who previously led General Re, praised the deal as a "great transaction" for the company's owners, businesses, customers, and employees. He emphasized that the value of the transaction reflects the quality of Alleghany's franchises and is a result of the hard work, persistence, and determination of the Alleghany team over many years.

Alleghany and its units will operate independently after the deal closes.

Some Berkshire shareholders may be taken aback by the deal, as Buffett and Munger have previously expressed their frustration in finding a significant acquisition. In his 2022 annual letter to shareholders, Buffett revealed that he and Munger found few deals that "excited" them.

Buffett stated that the Kirby family has run a business for 85 years that closely resembles Berkshire Hathaway. Jefferson W. Kirby serves as the chair of the Alleghany board of directors.

Berkshire, like Alleghany, began as a company focused on one industry before shifting to a more diversified portfolio.

Berkshire's massive cash hoard of $146.72 billion at the end of 2021 dwarfs $11.6 billion.

Berkshire's transaction boosts its presence in the specialty insurance and reinsurance sectors, with favorable market conditions for growth, according to Cathy Seifert, a Berkshire analyst at CFRA Research.

On Monday, Alleghany's shares experienced a nearly 25% increase, while Berkshire's Class A shares surpassed an all-time high by rising more than 2%.

Goldman Sachs and Willkie Farr & Gallagher are advising Alleghany on the completion of the transaction.