Berkshire Hathaway to purchase Alleghany Corp. in $11.6B deal
Alleghany has a 25-day window to actively solicit and consider alternative proposals, per terms of the merger agreement.
In an all-cash deal valued at approximately $11.6 billion, Berkshire Hathaway Inc. is moving to acquire Alleghany Corporation. The transaction has already received unanimous approval from both companies’ boards and is anticipated to close during 2022’s final quarter, the acquiring firm reports.
“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,” Warren E. Buffett, Berkshire Hathaway’s chairman and CEO, said in a release.
The acquisition price is 1.26 times Alleghany’s book value (as of Dec. 31, 2021), and represents a 29% premium to Alleghany’s average stock price during the past 30 days and a 15% premium to its 52-week high closing price, Berkshire Hathaway reported.
Following closing, Alleghany will operate as an independent subsidiary of Berkshire Hathaway.
“This is a terrific transaction for Alleghany’s owners, businesses, customers and employees,” Joseph P. Brandon, Alleghany’s president and CEO, said in a release. “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.”
25-day ‘go-shop’ period
Under the terms of the agreement, Alleghany can actively solicit other acquisition proposals for a 25-day period and holds the right to terminate the Berkshire Hathaway deal in order to accept a better offer. Alleghany reported it doesn’t intend to announce any developments on alternative offers “unless and until” its board of directors makes a determination requiring disclosure.
If it closes, the transaction would intensify Berkshire Hathaway’s market share in medical professional liability and “other liability” lines, according to data from the National Association of Insurance Commissioners (NAIC).
During 2021, Berkshire Hathaway ranked eighth in market share in other liability, holding 3.86% of the sector, while Alleghany ranked 23rd with a 1.35% market share, NAIC data showed. In medical professional liability, Berkshire Hathaway held 17.95% of the market in 2021, ranking first, while Alleghany’s market share stood at 1.42% and the company ranked 16th.
Overall, Berkshire Hathaway had the second-largest market share across all P&C lines during 2021, holding 6.52%, according to NAIC data.
Related: