Warren Buffet’s Berkshire Hathaway has completed its acquisition of the investment holding conglomerate Alleghany, including all of their outstanding shares for $11.6 bn. The acquisition marks one of the most significant deals of the year for the insurance giant, as they acquire $848.02 per share of common stock cash. The transaction represents a multiple of 1.26x Alleghany’s book value since December 2021.
From what started off as a humble holding company for railroad investments, the Van Swingeren brothers’ Alleghany Corporation stands today as a dominant player in casualty and household insurance/reassurance. They were hence an obvious target for Warren Buffet, as the acquisition would compliment its already boastful portfolio of insurance business ownerships. Although the majority of Berkshire Hathaway’s revenue streams derives from insurance, it also comprises manufacturing, retail and energy generation/distribution companies. Alleghany’s portfolio includes a toy company as well as a steel manufacturing company - the latter was particularly attractive to Berkshire Hathaway, as manufacturing generates the highest revenue prior to taxes from their existing portfolio.
Due to the promising growth prospects of the acquisition, both parties demonstrated high levels of enthusiasm about the deal .Alleghany will be able to access Berkshire Hathaway’s large and rich capital reserves whilst at the same time being granted autonomy to “largely continue to run itself. On the other hand, Berkshire Hathaway will be able to further scale its insurance and reinsurance operations whilst simultaneously diversifying their investment portfolio.
As demonstrated from the Board of Directors voting, Alleghany has greenlighted the acquisition and is looking forward to providing long-term value to its investor and acquirer, Berkshire Hathaway.
Written by: Nathan Pearman
Source: Market Watch
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