Warren Buffett Just Announced His Biggest Deal in Years

Berkshire Hathaway announced on Monday morning that it plans to buy insurance company Alleghany for $11.6 billion, or $848.02 per share, in cash. The deal, which will be chairman and CEO Warren Buffett's biggest since 2016, is expected to close in the fourth quarter of this year.

According to the Omaha, Nebraska-based conglomerate, the deal "represents a multiple of 1.26 times Alleghany's book value at December 31, 2021, a 29% premium to Alleghany's average stock price over the last 30 days and a 16% premium to Alleghany's 52-week high closing price."

Berkshire Hathway, which held $146.72 billion at the end of 2021, last made a deal this major when it acquired industrial company Precision Castparts for $37 billion, including debt, six years prior.

New York-based Alleghany has ties to numerous insurance businesses, including wholesale specialty, property and casualty and reinsurance. Established in 1929, the company began as a holding for railroads before making the leap to insurance, a trajectory reminiscent of Berkshire's own arc from a textile manufacturing company founded in 1839 to the multinational conglomerate it is today.

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The acquisition marks yet another addition to Berkshire Hathaway's insurance portfolio, which already includes GEICO auto insurance and Gen Re insurance, among others. In a statement announcing the deal, Buffett noted that he's been watching Alleghany closely for 60 years and is sure "Berkshire will be the perfect home" for the company.

Likewise, Alleghany CEO Joseph P. Brandon, who helmed Gen Re previous to his current role, expressed enthusiasm for the agreement, calling it "a terrific transaction for Alleghany's owners, businesses, customers and employees" with a value that "reflects the quality of our franchises and is the product of the hard work, persistence and determination of the Alleghany team over decades."

Per the companies' joint statement, Alleghany and its subsidiaries will continue to operate independently.

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Despite the apparent fit, the move comes after a 2022 letter to shareholders in which Buffett and Berkshire Hathaway Vice Chairman Charlie Munger said they found little that "excites" them where large deals are concerned.

Alleghany shares were up 25% on Monday, while Berkshire's Class A shares climbed more than 1% after last week's record-high closing above $500,000.