Berkshire’s $11.6B Alleghany deal expands insurance business

Mar 20, 2022, 3:52 PM | Updated: Mar 21, 2022, 9:56 am
FILE - Warren Buffett, Chairman and CEO of Berkshire Hathaway, smiles as he plays bridge following ...

FILE - Warren Buffett, Chairman and CEO of Berkshire Hathaway, smiles as he plays bridge following the annual Berkshire Hathaway shareholders meeting in Omaha, Neb, May 5, 2019. Buffett’s Berkshire Hathaway is buying insurance company Alleghany in a deal valued at approximately $11.6 billion a statement reported Monday, March 21, 2022. (AP Photo/Nati Harnik, File)

(AP Photo/Nati Harnik, File)

Warren Buffett, who started the year bemoaning the lack of potential acquisitions for his conglomerate, Berkshire Hathaway, announced Monday that it would acquire the insurance company Alleghany for $11.6 billion.

The scarcity of investment targets over the past several years turned into a cash pile of $146.7 billion at Berkshire by the end of 2021, but the company appears to have found a suitable place for some of that cash in recent days.

The Omaha, Nebraska, company revealed last week that it had compiled a 14.6% stake in Occidental Petroleum, snapping up an additional $1 billion worth of shares just between Monday and Wednesday. That was on top of the more than $6 billion Berkshire spent acquiring shares of the oil producer over the past month.

The all-cash acquisition of Alleghany will expand Berkshire’s already considerable insurance holdings, including brands like Geico auto insurance.

“Berkshire will be the perfect permanent home for Alleghany, a company that I have closely observed for 60 years,” Buffett said in a prepared statement Monday. “Throughout 85 years the Kirby family has created a business that has many similarities to Berkshire Hathaway.”

Alleghany’s core businesses are in property and casualty reinsurance and insurance, but like Berkshire, it also owns several other businesses, including a steel fabricator and a toy company, and manages an investment portfolio. Edward Jones analyst Jim Shanahan said nearly one-third of Alleghany’s revenue came from those operating companies and its investments last year.

“This is a highly complimentary and very similar franchise,” Shanahan said. “I’m really pleased to see Berkshire putting capital to work in the market.”

Berkshire will pay $848.02 in cash for each outstanding share of Alleghany Corp., the company said Monday.

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

CFRA Research analyst Cathy Seifert said this deal makes sense for both companies because it will provide Alleghany access to Berkshire’s massive capital reserves while expanding insurance and reinsurance operations at Buffett’s company at time when the growth prospects for those companies are good.

Alleghany, based in New York City, will operate as an independent subsidiary of Berkshire Hathaway after the transaction’s closing. It has 25 days to actively solicit and consider alternative acquisition proposals under a “go-shop” provision. If another suitor does offer a higher price for Alleghany, Berkshire could lose out on the deal because Buffett avoids bidding wars and rarely increases what he offers for acquisitions.

The analysts said it likely helped this deal come together that Buffett is familiar Alleghany’s CEO, Joe Brandon, who previously led one of Berkshire’s reinsurance companies for seven years.

The deal announcement comes after Buffett said last month in his annual letter to company investors that he was having difficulty finding worthwhile acquisitions at prices he likes with the valuations on companies soaring.

Yet Berkshire has made sizeable investments in Occidental since late February just as the price of oil began to spike, bringing along the shares of oil producers with it. Benchmark U.S. crude had jumped more than 40% this year with its rise accelerated by Russia’s invasion of Ukraine.

Shares of Occidental have jumped nearly 150% in the same period. That price increase has brought Occidental shares to a point just over where Berkshire holds warrants to buy another 83.9 million shares for just over $59.62 apiece. Berkshire picked up those warrants when it agreed to help finance Occidental’s acquisition of Anadarko

The boards of both Allegheny and Berkshire have approved the deal and it’s expected to close in the fourth quarter. It still needs approval from Alleghany shareholders.


Chapman reported from New York and Funk contributed to the story from Omaha, Nebraska.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


File - People shop at an Apple store in the Westfield Garden State Plaza mall in Paramus, New Jerse...
Associated Press

A key inflation gauge tracked by the Fed slowed in February

The Federal Reserve's favored inflation gauge slowed sharply last month, an encouraging sign in the Fed's yearlong effort to cool price pressures through steadily higher interest rates.
1 day ago
FILE - The OpenAI logo is seen on a mobile phone in front of a computer screen displaying output fr...
Associated Press

Musk, scientists call for halt to AI race sparked by ChatGPT

Are tech companies moving too fast in rolling out powerful artificial intelligence technology that could one day outsmart humans?
2 days ago
Associated Press

Starbucks leader grilled by Senate over anti-union actions

Longtime Starbucks CEO Howard Schultz faced sharp questioning Wednesday before the Senate Health, Education, Labor and Pensions Committee
3 days ago
FILE - The overdose-reversal drug Narcan is displayed during training for employees of the Public H...
Associated Press

FDA approves over-the-counter Narcan; here’s what it means

The U.S. Food and Drug Administration on Wednesday approved selling naloxone without a prescription, the first over-the-counter opioid treatment.
3 days ago
FILE - A Seattle police officer walks past tents used by people experiencing homelessness, March 11...
Associated Press

Seattle, feds seek to end most oversight of city’s police

  SEATTLE (AP) — The U.S. Justice Department and Seattle officials asked a judge Tuesday to end most federal oversight of the city’s police department, saying its sustained, decade-long reform efforts are a model for other cities whose law enforcement agencies face federal civil rights investigations. Seattle has overhauled virtually all aspects of its police […]
4 days ago
capital gains tax budgets...
Associated Press

Washington moves to end child sex abuse lawsuit time limits

People who were sexually abused as children in Washington state may soon be able to bring lawsuits against the state, schools or other institutions for failing to stop the abuse, no matter when it happened.
4 days ago

Sponsored Articles

Compassion International...

Brock Huard and Friends Rally Around The Fight for First Campaign

Professional athletes are teaming up to prevent infant mortality and empower women at risk in communities facing severe poverty.
Emergency Preparedness...

Prepare for the next disaster at the Emergency Preparedness Conference

Being prepared before the next emergency arrives is key to preserving businesses and organizations of many kinds.
SHIBA volunteer...

Volunteer to help people understand their Medicare options!

If you’re retired or getting ready to retire and looking for new ways to stay active, becoming a SHIBA volunteer could be for you!
safety from crime...

As crime increases, our safety measures must too

It's easy to be accused of fearmongering regarding crime, but Seattle residents might have good reason to be concerned for their safety.
Comcast Ready for Business Fund...
Ilona Lohrey | President and CEO, GSBA

GSBA is closing the disparity gap with Ready for Business Fund

GSBA, Comcast, and other partners are working to address disparities in access to financial resources with the Ready for Business fund.

Medicare open enrollment is here and SHIBA can help!

The SHIBA program – part of the Office of the Insurance Commissioner – is ready to help with your Medicare open enrollment decisions.
Berkshire’s $11.6B Alleghany deal expands insurance business