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Berkshire to expand insurance holdings with Alleghany acquisition

Warren Buffett

(Reuters) — Warren Buffett’s Berkshire Hathaway Inc. has struck an $11.6 billion deal to buy Alleghany Corp, the owner of reinsurer TransRe, just weeks after the 91-year-old billionaire bemoaned the lack of good investment opportunities.

Alleghany adds to Berkshire's already large insurance portfolio, which includes Geico auto insurance, General Re reinsurance and a unit that insures against major and unusual risks.

Founded in 1929 by railroad entrepreneurs Oris and Mantis Van Sweringen, New York-based Alleghany operates mainly in property/casualty reinsurance and insurance through subsidiaries and investments.

Alleghany, often likened to a mini Berkshire, was transformed from largely a railroad holding company into an insurance and investment company by Fred Morgan Kirby II. The company's board is currently led by Jefferson Kirby.

“Berkshire will be the perfect permanent home for Alleghany, a company that I have closely observed for 60 years,” Berkshire Hathaway's Chairman and Chief Executive Warren Buffett said in a statement Monday.

“Throughout 85 years the Kirby family has created a business that has many similarities to Berkshire Hathaway,” Mr. Buffett said.

Mr. Buffett had pledged in February to keep more than $30 billion of cash on hand, leaving plenty available for the right acquisition.

Alleghany's insurance holdings also include RSUI Group, an underwriter of wholesale specialty insurance, and CapSpecialty, a specialty insurance company.

Berkshire Hathaway offered $848.02 for each share of Alleghany, a premium of more than 25% to the company's closing price Friday.

The deal, which includes a 25-day “go-shop” period, is expected to close in the fourth quarter of 2022 and Alleghany will operate as an independent unit of Berkshire after closing.

The purchase reunites Mr. Buffett with Alleghany CEO Joseph Brandon, who had led Berkshire's General Re unit from 2001 to 2008. Mr. Brandon took up the reins at Alleghany in December.

Goldman Sachs advised Alleghany on the deal.


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