Business

Buffett’s Berkshire Hathaway pays $11.6 billion to buy Alleghany Insurance Group


OMAHA, Neb. Warren Buffett’s company completed its biggest acquisition in years on Wednesday with the $11.6 billion purchase of insurance group Alleghany.

Buying announced in March will further expand Berkshire Hathaway’s large-scale insurance operations and add several more companies to its stable, including a steel and toy manufacturing company owned by Alleghany.

In many ways, Alleghany is similar to Berkshire
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Buffett’s Omaha, based in Nebraska Coporation, group owns Geico, General Re and several other insurers, but it also owns the BNSF railroad, several major utilities, and dozens of manufacturing and retail companies, including Precision Castparts, Dairy Queen, See’s Candy and NetJets.

Alleghany shareholders received $848.02 in cash per share as part of the sale.

Like the other acquisitions, Berkshire will allow New York-based Alleghany to continue operating on its own.

Edward Jones analyst Jim Shanahan said Alleghany CEO Joe Brandon, who previously ran another Berkshire insurer, could one day become a candidate to replace Vice Chairman Ajit Jain and oversee all of Berkshire’s insurance companies.

Berkshire’s last major acquisition took place in 2016 when it paid $32.36 billion to buy aeronautical components maker Precision Castparts. Buffett is always reluctant overpaying for the acquisition, and he said Berkshire today faces more competition for deals from private equity firms.

But Buffett has put more 51 billion dollars to work on the stock market this year, including about $12 billion worth of purchases Mysterious petroleum storage
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and another $20 billion worth of Chevron
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stocks to bet big on oil production.

Still, Berkshire still owned $105.4 billion in cash at the end of the second quarter.

It will use some of that early next year to more than double its stake in the Pilot chain of more than 800 truck stops across 44 states and six Canadian provinces. Buffett’s Terms 2017 agreement called for them to increase their stake from the current 38.6% to 80% by 2023. That would make the Haslam family run the Knoxville, Tennessee-based business, with a 20% stake.

Shanahan estimates that the Pilot deal will use at least $3.5 billion, but Berkshire has never disclosed the terms of that deal.

In addition to owning more than 90 operating companies, Berkshire also holds a substantial portfolio with a large stake in Apple.
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Bank of America
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American Express
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and Coca-Cola
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among other companies.

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