Berkshire Hathaway To Buy Alleghany Corporation For $11.6 Billion

GEICO & Co. welcome a new member to the Berkshire Hathaway Insurance Family

Berkshire Hathaway (NYSE:BRK.A; BRK.B) , the second-largest P&C Insurer, All Lines, has announced its decision to purchase the Alleghany Corporation (NYSE:Y) in an all-cash deal valued at approximately $11.6 billion. Pending all regulatory approvals, the transaction is slated to close in the fourth quarter of 2022.

Warren Buffet. Photo Source: Three

This will be the first major insurance acquisition for Berkshire Hathaway this year, with Alleghany joining other Berkshire Hathaway companies such as GEICO and Berkshire Hathaway Specialty Insurance company, headquartered in Boston. The Berkshire Hathaway Group had approximately $51,603,817,860 in Direct Written Premiums, $50,073,595,442 in Direct Earned Premiums last year and currently claims a 6.51% share of the total P&C insurance marketplace.

Founded in 1929 by Oris and Mantis Van Sweringen, Alleghany’s first venture was in real estate in their hometown of Cleveland, followed shortly by the acquisition of five major railroads and the creation of their “super holding company” Alleghany to control the 200 companies it owned. It wasn’t until 1984, when under the leadership of F.M. Kirby II when the company began to transform into a major insurance player, going on to help create Capital Transamerica (now CapSpecialty) in 1992.

Over the past 30 years, the company has continued to expand its insurance portfolio adding RSUI, a specialty wholesale underwriting agency, and Darwin Professional Underwriters in 2003. In 2007 the company acquired the California-based workers compensation company PacificComp, while in 2012 it acquired TransRe. According to the Wall Street Journal, while the Alleghany Corporation’s main focus over the past years has been its property and casualty core, the company’s large portfolio of non-insurance entities has made many liken it to a “mini-Berkshire.”

“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,” said Warren E. Buffett, Berkshire Hathaway’s Chairman and Chief Executive Officer.

“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,” said Jefferson W. Kirby, Chair of the Alleghany Board of Directors. “Berkshire Hathaway’s support, resources, and expertise will provide added benefits and opportunities for Alleghany and its operating businesses for many years to come.”

“This is a terrific transaction for Alleghany’s owners, businesses, customers, and employees,” said Joseph P. Brandon, Alleghany’s President and Chief Executive Officer. “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.”

Further details on the transaction from the official announcement

Under the terms of the definitive merger agreement, Alleghany may actively solicit and consider alternative acquisition proposals during a 25-day “go-shop” period. Alleghany has the right to terminate the merger agreement to accept a superior proposal during the go-shop period, subject to the terms and conditions of the merger agreement. There can be no assurances that the “go-shop” process will result in a superior proposal, and Alleghany does not intend to communicate developments regarding the process unless and until Alleghany’s Board of Directors makes a determination requiring further disclosure.