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Wednesday, September 28, 2022

It all began with a dinner in New York, when Buffett announced his $11.6 billion investment

A meal between Warren Buffett and Alleghany Corporation Chief Executive Officer Joseph Brandon in New York City marked the beginning of one of Berkshire Hathaway Inc.’s newest acquisition searches.

According to a regulatory filing issued Monday, the two met for dinner on March 7, during which Buffett made it obvious that Berkshire was interested in purchasing Alleghany for $850 per share. That talk would serve as a springboard for Berkshire’s acquisition of Alleghany, which culminated in a $11.6 billion acquisition of the insurer disclosed later that month.

It is one of the most significant purchases made by Berkshire Hathaway and its billionaire CEO, Warren Buffett, in recent years. His deal-making engine has been ramped up lately, as seen by the conglomerate’s acquisition of Occidental Petroleum Corp. stock and the announcement of a new equity investment in HP Inc.

Buffett stipulated that the price of the meal would not include any fees for financial advisors during that event. As a consequence of this oddity, the stated transaction price of $848.02 was a little unusual. It is anticipated that the fee for Goldman Sachs Group Inc., which is advising Alleghany, would be deducted from revenues distributed to the insurer’s stockholders.

Alleghany’s negotiators would have to put up some resistance in order for the arrangement to be successful. At a meeting in Omaha, Jefferson Kirby, the company’s chairman, pressed Buffett on the pricing, urging him to raise the offer or remove the deduction for the financial adviser’s fee. A valuable — but difficult to achieve — aspect in a Buffett transaction was also advocated by him, which was the inclusion of Berkshire shares as a part of the offer. Buffett, who has previously expressed his displeasure with the use of Berkshire shares to acquire Dexter Shoe and General Re, remained steady.

As revealed in the document, Goldman eventually reached out to 23 possible strategic bidders and eight potential financial sponsors during a “go-shop” period in order to see if any of them were prepared to make a better offer for Alleghany. The go-shop period will finish on April 14 at 11:59 p.m. New York time, unless extended.

David Faber
I am a Business Journalist of The National Era
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